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Transfer company vehicle to Director

Can a director take a company vehicle out of the business to sell?

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Hello all, a client bought a Ford Ranger through his business on finance, and it has been a legitimate company vehicle for a few years.  The finance is now paid off, and he would like to sell it, but as the business is VAT registered, he would need to sell it with VAT on it.  He has asked if he can transfer ownership into his name (and account for the equivalent value as a dividend) then sell the vehicle privately without VAT.  It seems fairly logical, but wondering if I am missing something?  Thanks in advance!

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By Paul Crowley
25th Oct 2021 10:31

He charges himself VAT
I assume you understand that

There is no saving. Even worse if he sells to self, then makes a profit on reasale. That would be deliberate and possibly concealed evasion

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Replying to Paul Crowley:
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By clarkgilly
25th Oct 2021 10:44

Thanks Paul - yes, he would be charging himself VAT, but I hadn't thought about the profit. So, thank you - probably best not to do it!

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Replying to clarkgilly:
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By I'msorryIhaven'taclue
25th Oct 2021 10:57

Ooooh! You said:
He has asked if he can transfer ownership into his name (and account for the equivalent value as a dividend) then sell the vehicle privately without VAT.

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Replying to I'msorryIhaven'taclue:
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By clarkgilly
25th Oct 2021 11:04

Yes, he knew he had to charge himself VAT, however I think his thought was to sell it to himself for a cheaper price including the VAT, but resell without the VAT so it was more attractive to buyers. Overall, not really a good plan!

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Replying to clarkgilly:
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By Tax Dragon
25th Oct 2021 11:11

What if anything stops an employment income charge on the discount he gives himself?

(I disagree with Paul. If all taxes are correctly paid, there's by definition no evasion.)

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Replying to Tax Dragon:
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By Paul Crowley
26th Oct 2021 13:14

Consequently no point
Was the plan really to p11d the discount?
What about VAT on the discount?

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Replying to clarkgilly:
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By I'msorryIhaven'taclue
25th Oct 2021 11:18

Ahha, so transfer ownership into his name means sell it to himself.

Got it.

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Replying to clarkgilly:
RLI
By lionofludesch
25th Oct 2021 12:40

clarkgilly wrote:

Yes, he knew he had to charge himself VAT, however I think his thought was to sell it to himself for a cheaper price including the VAT, but resell without the VAT so it was more attractive to buyers. Overall, not really a good plan!

Well, no. If he's buying an asset with a view to selling it on at a profit, he's suddenly magically become a used vehicle trader.

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Replying to lionofludesch:
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By Tax Dragon
25th Oct 2021 12:58

So... technical question... as you know, amounts brought into charge as employment income may be reflected in the CGT base costs of some assets (either indirectly thanks to s17 or sometimes explicitly eg s119A(2), s120(2) etc)... is there any equivalent rule for the used vehicle tradesperson in the OP? Or might the profit element effectively be taxed twice, once as a discount and again as a trading profit? Or does generalia specialibus non derogant or some other general principle come to the taxpayer's aid?

.oO I do love these 'unwashed' questions. So much of interest in the dirt.

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By tom123
25th Oct 2021 10:39

Plus, remember insurance or lack of, if it leaves the company policy.
And, as he is not a motor trader, an extra owner on the v5

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Replying to tom123:
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By clarkgilly
25th Oct 2021 10:46

Thanks Tom - yes, he has understood the insurance will need to change to personal insurance, but perhaps not the extra owner on the V5. Thank you!

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By tom123
25th Oct 2021 10:53

If something looks too good to be true it usually is.
Just sell from the company to a vat registered user..

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Replying to tom123:
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By clarkgilly
25th Oct 2021 11:06

Very true! Thank you!

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Jason Croke
By Jason Croke
25th Oct 2021 15:52

The sale of the vehicle from company to Director personally would also need to be at market value (plus VAT), so the idea of selling a £20k+ car for £2.50 to himself isn't going to work.
https://www.gov.uk/hmrc-internal-manuals/vat-valuation/vatval07300

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Melchett
By thestudyman
26th Oct 2021 15:03

Yes I thought selling to yourself at less than market value, the sale must be treated as market value for Corp Tax (CGT) purposes?

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Replying to thestudyman:
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By Tax Dragon
26th Oct 2021 15:03

That's true, but doesn't s263 TCGA 1992 render the thought irrelevant?

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