Asset acquired on lease with optional final payment to transfer ownership. Does vat recovery of capital goods under Flat Rate scheme apply?

Asset acquired on lease with optional final...

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A new limited company client who has registered for vat as from 1 June.

We have registered him on the flat rate scheme and agreed to monitor the position.

He has just let me know he bought a van a couple of weeks ago. He has used a PCT lease.

I have'nt got the paperwork yet.

I'm a bit concerned because he has paid a £10k up front (plus vat) for the van there are then monthly payments and at the end of the agreement an optional payment for him to acquire ownership.

It sounds like a finance lease with balloon type payment.

I am not sure that the £10k down payment will fall within the allowance to claim vat back on capital assets under the flat rate scheme (because under the lease he will not own the van until the final payment is made).

I would be most grateful of advice on this.

Will the £10k down payment qualify for the vat on capital assets under the flat rate scheme?

If not, will we be able to change from the flat rate scheme to the ordinary scheme retrospectively to recover the £2k vat?

He only registered in July (reg date from 1st June) and no vat return has been submitted yet. 

Advice from my knowledgeable community members would be very much appreciated.

Thanks

Albie

Replies (2)

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Scalloway Castle
By scalloway
14th Aug 2014 19:16

VAT on an HP deposit

is normally paid up front and claimed on the next VAT return. I can't see why this doesn't apply here.

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Replying to atleastisoundknowledgable...:
avatar
By User deleted
15th Aug 2014 12:19

Normal

scalloway wrote:

normally

Whilst the flat rate scheme may be considered 'common', is it considered to be 'normal'?

Surely 'normal', in terms of VAT and in the eyes of H.M.R.C., is considered to be - Standard rated, Quarterly returns, more-often-than-not in a Liability position.

 

The point being, industries/sectors aside, FLS means you apply a flat rate of VAT to sales in the period and this accounts for the average level of input tax reclaim that a business in a given sector is expected to incur within a given period.

There is an additional concession where the asset purchased is of a value over £2,000

- the question would be "Who is the invoice made out to?"

The finance co or the business?

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