Purchasing a bike through the company for VAT purposes - creative accounting?

[tom73]

As some have said if the VAT man comes calling you know about it. If they want to dig around they will , if they want to go into the darkest cupboard they will. Hector the tax inspector they are not. I’ve yet to meet anyone who welcomes the knock on the door Or the boot though it.
The gain if any is just not worth the trouble and as a partner it’s your trouble and other partners will be over joyed when they get it too.

 

[Grant Fondo]

Post-April I'll no longer be eligible for any C2W schemes at work as I'll be classed as a partner but on the plus side I'll have more say on the financial side, so I was contemplating buying my next bike through the books & claiming the VAT back. Has anyone ever done this or does anybody understand "the rules" on how to do it without bending any tax rules and potentally upsetting HMRC?
Current thinking - I've recently set up a cycling club and the company is one of the sponsors, which means sponsored kit paid for with "advertising fees"; If we were to buy a bike "for the club" it could be purchased by the club, funded through sponsorship fees, OR could it simply be purchased by the company for the club and claimed as a company asset?

I'm not looking to defraud the tax man, I'm just looking for a way to buy via the company and hopefully save some money as I would on C2W...

I did it last summer, HMRC surely look kindly on substituting a car for a zero carbon form of transport.?
So, if you are on VAT flat rate it has to be +£2k bike to get VAT back. Then of course it is a business expense so -19% corporation tax. Not sure about P11D situation?

 

[PaulSB]

I'm interested to note the OP hasn't responded since the initial post.

 

[Grant Fondo]

I'm interested to note the OP hasn't responded since the initial post.

Bad signal in the Cayman Islands i understand

 

[Pale Rider]

Except in this case it isn't tax avoidance. It's tax evasion. It's illegal

I've no problem with anyone organising their affairs to minimise the tax they pay whilst remaining within the law. But people who do what the OP are suggesting are stealing from you and me. If someone evades tax it just means that someone else has to pay more tax to make up the shortfall

The idea that evading tax is fair game cos it's just means the IR is out of pocket is bollox

In his OP @nickAKA says he is looking to buy the bike 'without bending the rules' and he is 'not looking to defraud the taxman'.

Sounds reasonable to me, and certainly not stealing.

 

[bikingdad90]

HMRC don’t look kindly on limited companies controlled, owned and effectively operated by one man, they don’t trust them to get it right so it’s One of the reasons why the IR35 disguised employment comes into force in the private sector on 5th April 20, HMRC will make a killing just like they did in 2017 when it was brought in for public sector as they found in a lot of cases the “worker” was an deemed employee of the engaging company regardless of the contracting parties and the contractual arrangements.

A one man band will need to substantiate the financial risk, substituting rights and control of work to be able to fall outside IR35 to avoid PAYE like an employee and be able to go through their limited company and pay a dividend to the instead.

HMRC know larger organisations tend to be risk averse and dictate terms with smaller companies; begs the question what’s the point of operating through a limited company when you are a sitting duck.

The VAT will be disallowed by HMRC unless he can prove with evidence that the purchase was used to further the business which provided a taxable supply to a customer. In addition to the blocked VAT, the penalties for a deliberate error which was found by HMRC becomes a prompted disclosure in the event of an inquiry, meaning they penalty is more severe then an unprompted disclosure that can’t be fixed on the next VAT return due to been over the thresholds for errors.

What I am basically saying is HMRC will have a field day, hammering for indirect taxes (VAT), employment taxes and possibly even corporates taxes if it’s an incorporated partnership!

 

[Grant Fondo]

HMRC don’t look kindly on limited companies controlled, owned and effectively operated by one man, they don’t trust them to get it right so it’s One of the reasons why the IR35 disguised employment comes into force in the private sector on 5th April 20, HMRC will make a killing just like they did in 2017 when it was brought in for public sector as they found in a lot of cases the “worker” was an deemed employee of the engaging company regardless of the contracting parties and the contractual arrangements.

A one man band will need to substantiate the financial risk, substituting rights and control of work to be able to fall outside IR35 to avoid PAYE like an employee and be able to go through their limited company and pay a dividend to the instead.

HMRC know larger organisations tend to be risk averse and dictate terms with smaller companies; begs the question what’s the point of operating through a limited company when you are a sitting duck.

The VAT will be disallowed by HMRC unless he can prove with evidence that the purchase was used to further the business which provided a taxable supply to a customer. In addition to the blocked VAT, the penalties for a deliberate error which was found by HMRC becomes a prompted disclosure in the event of an inquiry, meaning they penalty is more severe then an unprompted disclosure that can’t be fixed on the next VAT return due to been over the thresholds for errors.

What I am basically saying is HMRC will have a field day, hammering for indirect taxes (VAT), employment taxes and possibly even corporates taxes if it’s an incorporated partnership!

IR35 is a joke for your average punter. Non of the benefits of PAYE, pension contribution paid holidays, healthcare etc etc, but most of the tax liability. Whoever thought than one up is a pillock.

 

[bikingdad90]

IR35 is a joke for your average punter. Non of the benefits of PAYE, pension contribution paid holidays, healthcare etc etc, but most of the tax liability. Whoever thought than one up is a pillock.

Or a bloody genuis depending on which side of fence you sit on!

It is possible you can make it more likely you fall outside in some cases depending on the arrangements; common one is a move to statement of works with staged payments rather than a day rate.

At least HMRC have confirmed they will not pursue arrangements that change in April for tax due before April.

 

[BoldonLad]

IR35 is a joke for your average punter. Non of the benefits of PAYE, pension contribution paid holidays, healthcare etc etc, but most of the tax liability. Whoever thought than one up is a pillock.

I could be wrong, but, I believe it was prudent Gordon (Brown). He of the Tax Credit Fiasco.

 

[Grant Fondo]

I could be wrong, but, I believe it was prudent Gordon (Brown). He of the Tax Credit Fiasco.

Was that Gordon 'I will stick 1p on NI and only use it to build new hospitals' Brown? Worked a treat as the £14bn now owed by NHS Trust's to HM Treasury surely underwrites our Gordon's shrewd fiscal management

 

[BoldonLad]

Was that Gordon 'I will stick 1p on NI and only use it to build new hospitals' Brown? Worked a treat as the £14bn now owed by NHS Trust's to HM Treasury surely underwrites our Gordon's shrewd fiscal management

The very same

But, like Football Managers, or, indeed Chief Executives, etc, total failure, does not seem to diminish earning potential

 

[nickyboy]

In his OP @nickAKA says he is looking to buy the bike 'without bending the rules' and he is 'not looking to defraud the taxman'.

Sounds reasonable to me, and certainly not stealing.

But then goes on to suggest "schemes" that are breaking the law and defrauding the IR.

He has every intention of breaking the law. All he wanted was a bunch of interwebbers to validate him.

 

[I like Skol]

In his OP @nickAKA says he is looking to buy the bike 'without bending the rules' and he is 'not looking to defraud the taxman'.

Sounds reasonable to me, and certainly not stealing.

Brings to mind two common phrases...

1. If it looks too good to be true then it probably is.
2. If it looks like a fish and smells like a fish then it is probably a fish.

Both phrases apply to what the OP is proposing!

I have been in business myself. 13 years as a sole trader and later a limited company. What is wrong with being honest and having a clear conscience? The way some people are talking here makes it sound like doing the right and decent thing is a crime.

 

[vickster]

HMRC don’t look kindly on limited companies controlled, owned and effectively operated by one man, they don’t trust them to get it right so it’s One of the reasons why the IR35 disguised employment comes into force in the private sector on 5th April 20, HMRC will make a killing just like they did in 2017 when it was brought in for public sector as they found in a lot of cases the “worker” was an deemed employee of the engaging company regardless of the contracting parties and the contractual arrangements.

A one man band will need to substantiate the financial risk, substituting rights and control of work to be able to fall outside IR35 to avoid PAYE like an employee and be able to go through their limited company and pay a dividend to the instead.

HMRC know larger organisations tend to be risk averse and dictate terms with smaller companies; begs the question what’s the point of operating through a limited company when you are a sitting duck.

The VAT will be disallowed by HMRC unless he can prove with evidence that the purchase was used to further the business which provided a taxable supply to a customer. In addition to the blocked VAT, the penalties for a deliberate error which was found by HMRC becomes a prompted disclosure in the event of an inquiry, meaning they penalty is more severe then an unprompted disclosure that can’t be fixed on the next VAT return due to been over the thresholds for errors.

What I am basically saying is HMRC will have a field day, hammering for indirect taxes (VAT), employment taxes and possibly even corporates taxes if it’s an incorporated partnership!

Yes this change is an utter pita for contractors like me and the types of large business I contract at

 

[confusedcyclist]

This 'creative accounting' you talk off. Isn't it the kind of thing we all lambast Amaz0n and offshore companies of that ilk for being guilty of and paying unfairly shrunken tax duties on their huge UK ear ed profits?
Strange how it is deemed obscene, immoral and unfair when they do it, but it's alright when you do the same.....

When gaming the tax system, we are effectively saying we don't want to support sick people in hospitals, the homeless and our elderly folk. Flip side of the coin, you're not funding the arms industry, MPs expenses, unsustainable public services etc. There are other ways to give to charity that don't involve such unpleasantries, so how about any money you save goes 100% and directly to a good cause?