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Vat on rental agreement

Vat on rental agreement - IT equipment

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Our company has got IT equipment under rental agreement (36 months, after the end of the agreement the equipment will become our company property)) at £12k +VAT £2.4k and interest £2640 + VAT £528.

We have put the equipment on Fixed Assets register and depreciating it.  

We pay monthly instalments at £406.67+ VAT£81.33.

Can I take the whole amount of VAT £2,298 in the account when prepare the company quarterly VAT Return? Or do I have to spread it over 36 month?

Many thanks

Replies (11)

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By stratty
22nd Sep 2016 14:35

You would account for the VAT each month as opposed to front loading it all in advance. Unless of course that was the terms of the arrangement.

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By Ckardie
22nd Sep 2016 15:57

Nice and clear.

Thank you

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By jcace
22nd Sep 2016 16:26

You should have been given a VAT schedule setting out the monthly payments and related VAT, that acts as your VAT invoice for reclaim purposes.

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By Ruddles
22nd Sep 2016 16:47

That doesn't make sense - you are either leasing the equipment or are you buying it. If the agreement has an option to purchase then it sounds very much like HP.

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Replying to Ruddles:
By NJH
26th Sep 2016 13:08

It could be a finance lease which would be capitalised, but the VAT payments are made (and reclaimed) on the instalment dates, not up front since the asset is still owned by the lessor in the VAT man's eyes (unlike HP).

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Replying to NJH:
By Ruddles
26th Sep 2016 13:23

But a finance lease agreement would not (or at least, should not) provide for the asset to be transferred to the lessee.

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Replying to Ruddles:
By NJH
26th Sep 2016 14:08

Maybe not directly, but there are other ways around this. It also seems to me that often the secondary rental period is dressed up as actual ownership when the agreement is being sold.

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Replying to NJH:
By Ruddles
26th Sep 2016 16:04

Possibly - we could chat all day about all of the possiblities. It would be nice if, for a change, the OP having been given the benefit of free advice were to provide some pertinent facts so that an informed response could actually be given.

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By tom123
22nd Sep 2016 18:42

Of course if it is HP (as Ruddles says) then you should have an HP agreement that will include all the VAT on the initial 'invoice' from whence you can claim it.

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By aland
26th Sep 2016 15:54

Though not an expert in HP, finance leases etc, I would have thought that you claim whatever it says on the VAT invoices that you (should) have been supplied with and it is down to the supplier to apply the appropriate allocations. That way HMRC get the same amounts returned by both sides of the agreement.
(much as jcace suggests).

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7om
By Tom 7000
28th Sep 2016 10:10

monthly

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