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BIK on discount of hiring a car a shareholder owns

Looking to buy a supercar with new LTD company with a group of shareholders to enable VAT offset.

Any help is appreciated:

So looking to buy a supercar with new LTD company with a group of shareholders to enable VAT offset. 

Plan to give shareholders 'discount' on hire, say £1 per week. Will there be BIK due on difference between commercial hire value. 

Surely the cost of premium discount membership caters for the discount? 

 

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21st Nov 2017 10:42

Yacht chartering, helicopter chartering, jet chartering. It's all been done, and HMRC are well rehearsed in attacking it.

I doubt that there will be any VAT recovery in the circumstances you describe. But then again, you couldn't be ar5ed to give any specifics.

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By Ruddles
21st Nov 2017 11:05

It won't work

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By Chris Mann
21st Nov 2017 11:11

Has the "smell" of Lewis Hamilton about it, don't you think? A tad Manx?

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By Mr_awol
21st Nov 2017 12:07

1) it probably wont work
2) to get it to work and to negate point 1, you'd have to be a specialist in this field
3) if you're asking on here, point 2 probably doesn't apply and as such you're back at the beginning

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to Mr_awol
21st Nov 2017 15:43

The OP was about BIKs, not VAT. Maybe the OP is a VAT specialist but doesn't know about employment tax. Most VAT specialists I know don't know about employment tax....

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to Tax Dragon
21st Nov 2017 16:17

Both specialised area's.

I guess i have 2 separate questions (1 has been confirmed)

1. Can we claim the VAT back if we rent the car for 3-4 months of the year and rent it for a discount to the shareholders for the rest.

2. Is the difference between the full market value of the rental to owners and the discount they pay due for BIK?
(they have paid a premium for the discount membership)

thanks in advance?

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to pacepowerskill
21st Nov 2017 16:22

On 2, the answer's no. That's not the calculation.

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to Portia Nina Levin
21st Nov 2017 18:08

Thanks for your help amongst all the unhelpful comments.

I'm not a chartered accountant so forgive me, i'm looking at the possibility of setting this company up but need to know these 2 points to know if its worthwhile.

If you can Portia, would you be so kind to inform me of the correct calculation?

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By Mr_awol
to Tax Dragon
22nd Nov 2017 16:05

Tax Dragon wrote:

The OP was about BIKs, not VAT. Maybe the OP is a VAT specialist but doesn't know about employment tax. Most VAT specialists I know don't know about employment tax....

Maybe. Not sure it's relevant to my post though (which still stands). I didn't mention VAT until I responded to PNL later on...........

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21st Nov 2017 15:12

Sorry what more details do you want?

Its an electrical car, the car will have a website and be hired out for 3-4 months at full market value on the open market.

What do i need to change to make it work?

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to pacepowerskill
21st Nov 2017 15:16

pacepowerskill wrote:

What do i need to make it work?

Electricity, presumably?

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By Chris Mann
to Portia Nina Levin
21st Nov 2017 15:34

Lots of Duracell's I'd have thought. Lots and lots and lots and lots and lots and lots, of Duracell's. Or Ever Ready U2's? In any event, lots and lots and lots and lots.

After all, it's a "Supercar".

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21st Nov 2017 15:18

Is the plan to hire it out for 3-4 months and after that the "owners" get to use it personally?

In that case, I think you can claim the input VAT. |Don't forget to deregister once the 3-4 month period has elapsed though.

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By Mr_awol
to Portia Nina Levin
21st Nov 2017 15:39

Portia Nina Levin wrote:

|Don't forget to deregister once the 3-4 month period has elapsed though.

Ahh but he only registered six months ago (having run his business from a spare room at his mum's house back in early 2016. Now he's buying supercars I don't think he will have time to be pissingp*ssing about with VAT issues........

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to Portia Nina Levin
21st Nov 2017 15:57

Yes Portia, 3-4 months

Great thought we needed to wait 6 months but thats fine.

Great to have a genuine answer amongst all the sarcastic / funny answers !

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By mrme89
to pacepowerskill
21st Nov 2017 16:03

Portia has made a point that clearly went over your head.

Re-read the post until you understand it.

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to mrme89
21st Nov 2017 18:04

I have re-read the post and im struggling to see what im missing

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By mrme89
to pacepowerskill
21st Nov 2017 19:05

Think about the VAT adjustment when the company no longer intends to make taxable supplies and deregisters.

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By Briar
to mrme89
21st Nov 2017 23:22

Love it! And PNL's solution too.

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to pacepowerskill
21st Nov 2017 16:11

pacepowerskill wrote:

Yes Portia, 3-4 months

Great thought we needed to wait 6 months but thats fine.

Great to have a genuine answer amongst all the sarcastic / funny answers !


My turn to ask: what was the question?
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21st Nov 2017 16:23

I'm not sure I understood your logic in the final sentence, but there will be a BIK if the shareholders who use the car are directors or shadow directors.

You do the normal calculations for a company car with zero emissions, and liability arises based on the number of days for which the car is available to the director or shadow director for private use. I have seen HMRC argue that a company asset is available for private use at any time when it is not being used for a business purpose, so expect an argument about the meaning of 'available'.

If the list price is £100k, the BIK is 9% for a zero-emissions car, about £173 per week this year (assuming Optional Remuneration rules don't apply to the director in question).

The difference between the market hire rate and discounted hire charge is irrelevant because it's a company car.

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to David Heaton
21st Nov 2017 16:28

The calculation is the same for a shareholder who is neither a director nor a shadow director (nor any other sort of officer or employee). It is just taxable under a different provision, and won't give rise to Class 1A.

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to David Heaton
21st Nov 2017 18:25

Thanks for the really helpful explanation David, are you looking to take on any new clients?

What if the car was in full business use all year, which we could prove. If not to a full paying client but to shareholders who receive a significant discount but do pay for its hire.

Would there be zero BIK?

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By Ruddles
to pacepowerskill
21st Nov 2017 19:30

Someone connected (in the ordinary sense) to a company is allowed to hire an asset for a fraction of the market rent. As I sit pondering the question on the way to Clapham, my fellow bus passengers seem to think that someone is benefitting from the arrangement. I'm inclined to agree with them.

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