Need some adivce about contract working and VAT claims

Right, I might be landing a contract job (my first contract job), and I'm a little confused, to say the least, about VAT claims I can make. If I set up my own limited company or join an Umbrella company, can I claim back VAT for a lease car I will be using to travel to work?



Thanks guys :)
 
Sorry to not fully answer your question, but my two pence worth anyway.

If you are operating under your own Ltd company you will have a strong case to claim VAT back on your car payments and other expenses, but there might be questions asked if the car is not registered in the name of the company. One of the resident accountants will be able to confirm.

If operating through an Umbrella company you would certainly get tax relief on expenses such as mileage but I do not think you can claim VAT from your car payments as this is not specific to your contract other than getting there and back.
 
Sorry to not fully answer your question, but my two pence worth anyway.

If you are operating under your own Ltd company you will have a strong case to claim VAT back on your car payments and other expenses, but there might be questions asked if the car is not registered in the name of the company. One of the resident accountants will be able to confirm.

If operating through an Umbrella company you would certainly get tax relief on expenses such as mileage but I do not think you can claim VAT from your car payments as this is not specific to your contract other than getting there and back.

Thanks for your reply :)

What could stop me getting the car in the name of the company? Couldn't I take the lease out as the director of the Ltd company?

I'll be saving over £100 a month if I can claim back VAT, so hopefully I can lol!
 

penno116

Novice Member
Thanks for your reply :)

What could stop me getting the car in the name of the company? Couldn't I take the lease out as the director of the Ltd company?

I'll be saving over £100 a month if I can claim back VAT, so hopefully I can lol!

perhaps the contact! you need to be self employed first. it wont be that simple register company, lease car, save £100.

everyone would have their own private little company, along with their job, if it was that easy!
 
Thanks for your reply :)

What could stop me getting the car in the name of the company? Couldn't I take the lease out as the director of the Ltd company?

I'll be saving over £100 a month if I can claim back VAT, so hopefully I can lol!

sorry, i misread i thought you already had the car and missed the fact it is a lease.

You shouldnt have a problem providing you have the company set up etc. An accountant would confirm for sure though. Im just hazarding guesses herew.:D
 
perhaps the contact! you need to be self employed first. it wont be that simple register company, lease car, save £100.

everyone would have their own private little company, along with their job, if it was that easy!

Contracting is looked upon as self employed :p

If your on full time employment, you can't set up a Ltd company, if your a contractor/self employed, you can! :)
 
sorry, i misread i thought you already had the car and missed the fact it is a lease.

You shouldnt have a problem providing you have the company set up etc. An accountant would confirm for sure though. Im just hazarding guesses herew.:D

Lol, no I don't have it yet. Thanks for your help, this is what I thought too! Just need to pick a car now... Range Rover Sport, Porsche Cayman or a BMW 330 Coupe hmm lol!
 

FaxFan2002

Well-known Member
Careful on the VAT, there is a rule of thumb that if you claim less than 10% of you total earnings back in VAT you shouldn't claim VAT back, but enrol in the VAT FSR scheme.

Basically the VAT FSR scheme you invoice the client 17.5% VAT and pay the VAT man 13% (12% in the first year).

So if you invoice 6,000 + vat a month, you get paid 7050, of which 1050 is vat. You then pay the vat man 780 (13%) and you keep 270 of the vat element. So depending on what you expenses are and what your invoicing it is either worth it or not.

PLUS - you can only claim 50% of the vat back on contract hire cars if they are kept at your home address (unless of course you work from home!).
 
Careful on the VAT, there is a rule of thumb that if you claim less than 10% of you total earnings back in VAT you shouldn't claim VAT back, but enrol in the VAT FSR scheme.

Basically the VAT FSR scheme you invoice the client 17.5% VAT and pay the VAT man 13% (12% in the first year).

So if you invoice 6,000 + vat a month, you get paid 7050, of which 1050 is vat. You then pay the vat man 780 (13%) and you keep 270 of the vat element. So depending on what you expenses are and what your invoicing it is either worth it or not.

PLUS - you can only claim 50% of the vat back on contract hire cars if they are kept at your home address (unless of course you work from home!).


Thank you for clearing this up :)

My only expenses to claim back would be the car lease and petrol. (maybe insurance if I could include this too?), which is no where near 10% of my earnings. How strict is this rule of thumb? Either way nice to know I can get something back lol
 

mason

Active Member
Thank you for clearing this up :)

My only expenses to claim back would be the car lease and petrol. (maybe insurance if I could include this too?), which is no where near 10% of my earnings. How strict is this rule of thumb? Either way nice to know I can get something back lol

there is no rule of thumb here. you can voluntary registered as VAT registered regardless of you income or expenses- on the simple fact that some compaies wont deal with you unless you are VAT registered. however the VAT thresh hold is £64k per annum so if you hit this or expect too, then you would have to register anyway.

Also for your note sakes- umbarella companies are not the best way of dealling with this.

If you need any advice i would be happy to assist- just PM me and i can contect you via phone etc.

NOTE:
Also- each person/company etc is treated as individual advice- all advice cant just be generalised but the advice given would depend on a number of factors,
 

SanPedro

Well-known Member
Thank you for clearing this up :)

My only expenses to claim back would be the car lease and petrol. (maybe insurance if I could include this too?), which is no where near 10% of my earnings. How strict is this rule of thumb? Either way nice to know I can get something back lol

Don't forget that, if you are a limited company, the car will be treated as a company car and you will be taxed accordingly on this as a benefit in kind.

You can claim part of the VAT back on the lease payments and the rest of the lease payments go against your company's tax bill.

You can claim all legitimate expenses against your business. On the car you will have to claim mileage expenses to offset against the tax you pay as a benefit.

I'd suggest speaking to an accountant about all of this as the last thing you want is the Revenue & Customs breathing down your neck.
 

FaxFan2002

Well-known Member
From what you say I would enrol in the VAT FRS, get the car on a personal lease (normally contract hire + vat) and claim back mileage from your company @ 40p per mile for the 1st 10,000 then 25p thereafter.

Don't forget you can claim VAT back but you also have to pay it when you invoice it as well!
 

Steve.J.Davies

Well-known Member
depends how many business miles you will do a week/year.
It can pay to hire a 12-18 month old Focus (or thereabouts) and just claim the business mileage.
last time I did that I ended up with a car that cost me 11 quid a week net plus ant petrol for private mileage. and all servicing, tyres, breakdown costs and insurance were part of the hire. there are companies around that do these kind of hires and they will (mostly) give you a good rate if you lease for three-six month chunks.
if you are going to go the VAT route it can be a pain - but of you do always make one small mistake on your VAT return that they can spot, makes 'em feel good and keep their numbers up.
As you are just starting contracting best advice is keep it as simple as you can while you get your feet wet - and scope down on the target car. Better financially and doesn't get the customer's backs up aka "How much are we paying that flash sod".. Also tax man doesn't take too close an interest which he may well do if you stick with that short list and try to max out the expense of it on your company.

Once you have built up you cash reserves then you can decide on further options.
 

RonBurgundy

Active Member
remember company car tax is calculated on the original list price of the car and emmissions... bmw 335i coupe with its twin turbos etc etc your asking for a big bill!

better off buying / leasing the car personally and claiming mileage as mentioned above at 40p/25p after 10k miles... it soon adds up (and its an allowable expense on your accounts therefore knocking your profit figure down which obviously you will be taxed on)


also, give your accountant a call and get him to go over IR35 with you
 

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