When is a van not a van ... ask HMRC!

[chriscroft]

Vat liability ? Vat has nothing to do with the benefit in kind rates you pay to legally use your business vehicle for private use.

I am fully aware of this; but does anybody know for sure that the VAT reclaim is 100% safe if you use your van for leisure. i.e. could HMRC start to question the validity of the VAT reclaim if the vehicle is not used 100% for a VAT qualifying business?

 

[ZipcodeUK]

I am fully aware of this; but does anybody know for sure that the VAT reclaim is 100% safe if you use your van for leisure. i.e. could HMRC start to question the validity of the VAT reclaim if the vehicle is not used 100% for a VAT qualifying business?

Well, there are a few points here:
1) there is no ambiguity about vat qualifying businesses, either you are vat registered or you are not
2) ifnyou vehicle was paid for with your business funding, and the business owns it, they can claim the vat, whether you also use the vehicle for leisure has nothing to do with it. BUT, I guess if you bought a van with the business, paid off the Vehicle and claimed the VAT and don't use it for business at all, and only for leisure....then there may be an issue there, but even then I wouldn't of thought it be a VAT issue, more a personal tax / bik issue.

 

[ZipcodeUK]

Also, if hmrc change the rules for our vehicles, I will claim I can no longer afford it and that the rules now devalue our vehicles significantly. I will then have to cut my losses and sell the vehicle for scrap value.

 

[chriscroft]

I know this is s thread about BIK and Kombi's; but it is the ability of HMRC to gain a ruling that is back-dateable (2011), and then put the bejesus up everybody. Perhaps it could be over turned who knows?, and BIK & VAT are different.

But anybody who has a 100% VAT reclaim on Kombi could be it risk if the Kombi changes from a commercial vehicle(VAN) to a Car. In fact any non-business use can put at risk a 100% VAT reclaim; particularly if it is not a lease which may only have a 50% reclaim.

This link talks about vans and cars: Reclaiming VAT: Vehicles and fuel costs - GOV.UK

“What gets us into trouble is not what we don't know. It's what we know for sure that just ain't so.”
― Mark Twain
Every bit of advice I have had from my Accountant has either been verbal (i.e. open to back-tracking or miss interpretation); or so full of caveats as to be vague to say the least; or based on the prevailing case law/sentiment which can be turned on its head by a different ruling.

I bet Coca-Cola had good expensive advise re Kombi's; and then appointed the countries best QC's to fight HMRC ; and then lost. Maybe the pro-rata rule on VAT is appropriate i.e. split between Business & Personal.
All I am saying is Be Careful!!!!!!! and a making your Kombi look like 100% business use, maybe part of your defence, if anybody asks; be-that BIK or VAT.

 

[chriscroft]

Well, there are a few points here:
1) there is no ambiguity about vat qualifying businesses, either you are vat registered or you are not
2) ifnyou vehicle was paid for with your business funding, and the business owns it, they can claim the vat, whether you also use the vehicle for leisure has nothing to do with it. BUT, I guess if you bought a van with the business, paid off the Vehicle and claimed the VAT and don't use it for business at all, and only for leisure....then there may be an issue there, but even then I wouldn't of thought it be a VAT issue, more a personal tax / bik issue.

Not sure this is correct. If you use your van that has had a 100% VAT reclaim(at the prevailing rate) for business use; then use it for personal use, there could be a problem with VAT. But I really do not know for sure; unless the business charges for the hire and adds VAT to the hire. But then you may have to check your insurance.

 

[WolverineMac]

The ruling made has nothing to do with VAT. Its to do with the benefit in kind rules.

By the look of your post you have a Caravelle and as such this would never have been classed as a van and the VAT reclaimable, unless it was 100% business use and for the purpose of the trade.

As for BIK, the benefit in kind on a VW Caravelle is circa £18k meaning personal tax due of around £3.6K (20%) ir £7.3K (40%). As well as Class 1a National Insurance paid by the company of £2.5K.

A £39K Kombi if classed as a van would have a BIK of £3,230 so around £646 (20%) or £1,292 (40%) the same vehicle classified as a car would have a BIK of £14,659 and £2,932 (20%) or £5,863 (40%). This is a large jump. But an even bigger increase and one that most forget about , is if fuel is paid for by the company as this could result in a fuel benefit of £8,362 and additional tax of £1,672 (20%) or £3,345 (40%) compared to a van fuel charge of only £610 and tax of £122 (20%) or £244 (40%).

In summary the same Kombi could have a charge under the old rules of £768 (20%) - £1,536 (40%) to a stonking £4,604 (20%) - £9,208 (40%) plus the associated class 1a national insurance contributions paid by the company.

 

[Scruffy]

I'm sorry, but going back to the OP, the Vivario kombi is a van and the VW Kombi is a car? I can't find anymore info on this story, so how on earth are the HMRC differentiating between the two?

 

[WolverineMac]

Its not the fact it was a vivaro that made it a van it was the way the van was adapted. It had a two seats added that took up just over half of the width of the van and an additional window added behind the front row of seats together with a steel bulkhead behind the mid-section, panelling, racking, strapping, cargo nets, cargo tracks, shelving and storage units. Some of the shelving was in the mid-section, behind the twin seats and to their left-hand side.

Although the Vivaro was capable of carrying both passengers and cargo, because the mid-section cargo-carrying capability existed even when the mid-section seats were in place in the vehicle, the judge concluded that on a narrow balance, the Vivaro was primarily suited to the conveyance of goods and was therefore a goods vehicle.

The kombis mid sections were taken up by the additional seats, the judge considered that both the Kombi 1 and the Kombi 2 were multi-purpose vehicles with no primary suitability. Therefore, the Kombi 1 and the Kombi 2 were not of a construction which was primarily suitable for the conveyance of goods or burden.

Had the Vivaro had a similar configuration as the kombi, i.e. a row of seats rather than a two seat racking setup this would have been classified as a car.

 

[chriscroft]

The ruling made has nothing to do with VAT. Its to do with the benefit in kind rules.

By the look of your post you have a Caravelle and as such this would never have been classed as a van and the VAT reclaimable, unless it was 100% business use and for the purpose of the trade.

As for BIK, the benefit in kind on a VW Caravelle is circa £18k meaning personal tax due of around £3.6K (20%) ir £7.3K (40%). As well as Class 1a National Insurance paid by the company of £2.5K.

A £39K Kombi if classed as a van would have a BIK of £3,230 so around £646 (20%) or £1,292 (40%) the same vehicle classified as a car would have a BIK of £14,659 and £2,932 (20%) or £5,863 (40%). This is a large jump. But an even bigger increase and one that most forget about , is if fuel is paid for by the company as this could result in a fuel benefit of £8,362 and additional tax of £1,672 (20%) or £3,345 (40%) compared to a van fuel charge of only £610 and tax of £122 (20%) or £244 (40%).

In summary the same Kombi could have a charge under the old rules of £768 (20%) - £1,536 (40%) to a stonking £4,604 (20%) - £9,208 (40%) plus the associated class 1a national insurance contributions paid by the company.

I KNOW THIS RULING IS NOT ABOUT VAT (sorry for shouting ); It is still a very valid statement imo, to be very careful with HMRC when the vehicle has an element of personal use; in both regards (BIK&VAT). I run the Caravelle as a personal vehicle and claim milage, and VAT back on the fuel element only. But this is not about my Caravelle; we have other vehicles as well which are company owned.
I think, the Coca-Cola issue only arrises because there is personal use of the vehicle; and HMRC don't like posh vans , which you could never accuse the Vauxhall of being , and it is stated in the terms of employment you will be provided with a vehicle. HMRC used to insist that it went back to base (company yard) at night for a 100% commercial use only vehicle; but for lots of people who work in particular areas of the country not near the company base; this is not possible.

Can't Beat HMRC to get peoples Blood Up

 

[WolverineMac]

In terms of Vans, you are allowed to use them fir for ‘insignificant’ private journeys (eg making a slight detour to pick up a newspaper on the way to work. or the occasional trip to the tip). They are also allowed to park the vehicles at home as this is a more secure location and makes things more efficient.

Cars on the other hand you are not allowed to park the cars at home as they are allowed zero private use.

Private use of vehicles has always been an issue this not something new.

Following an announcement in the 2002 budget on the determination of the taxing requirements of employer provided vans, reviews took place focusing on simplifying the rules on shared vans. From 6 April 2005 a nil charge will apply to employees who have to take their van home and are not allowed other private usage. Where other private use is insignificant, e.g taking rubbish to a tip once or twice a year or regularly making a slight detour to stop at a newsagent on the way to work, then no tax or Class 1A will be due in respect of the company van used in this way.

From 6 April 2016, because of the long lead in period required by employers, a van with unrestricted private use has a flat benefit rate of £3,230 regardless of the age of the van. If the employer provides fuel for unrestricted private use an additional fuel charge of £610 will also apply.''

 

[WolverineMac]

We have our employees sign a disclaimer.

'I can confirm that I have read the attached article relating to employer provided vans and confirm that from 6 April 2017, although I take a company van home, I do not make use of it for other private mileage'

 

[Scruffy]

Hmmm......I wonder what they would make of my setup? Factory Kombi, T32 ( for payload) permanent bulkhead behind 2nd row of seats, shelved out, but not permanent as I change them to suit what gear I'm carrying.

Unfortunately there are far too many people driving around in Kombis and pick ups, playing the system shall we say, who will eventually catch the eye of the HMRC, and it will be the poor buggers like myself who use the kombi setup to its fullest who will lose out.

 

[chriscroft]

Hmmm......I wonder what they would make of my setup? Factory Kombi, T32 ( for payload) permanent bulkhead behind 2nd row of seats, shelved out, but not permanent as I change them to suit what gear I'm carrying.

Unfortunately there are far too many people driving around in Kombis and pick ups, playing the system shall we say, who will eventually catch the eye of the HMRC, and it will be the poor buggers like myself who use the kombi setup to its fullest who will lose out.

I know of an accountant who has a Nissan Double Navarra 4*4 Pickup......WTF......., Really........., not a sign of commercial use.......

 

[Cryne2]

I test drove a dsg Kombi last week ready to order one but was put on hold after seeing the judges verdict.
A 1 ton Kombi payload does not mean your safe. Payload for a van has nothing to do with it. If you have seats it's a car.
http://financeandtax.decisions.tribunals.gov.uk//judgmentfiles/j10050/TC06082.pdf
It's a right mess....

 

[WolverineMac]

The kombi's have always been a grey area, hence the case recently. The payload figure relates to double cabin trucks (i.e. the amorak) and have never had anything to do with vans. However, given it was a grey area alot of businesses purchased Kombi's as they was no definite answer. Many lets be honest that did not even use them very much for business purposes, as self evident by the pictures on facebook of them with surfboards on the roofs etc..

 

[chriscroft]

This thread is evolving nicely, as we all throw our understandings/misunderstandings in the pot.
It's not hard to understand why the Van Dealers & Accountants are always Guarded in their responses regarding the Tax/Vat position of any particular vehicle.
It almost seems as if HMRC keep their options open to change their view. It is a very unsatisfactory state of affairs.

The Canons of Taxation
Listen to this chapter:
THE BEST MEANS of raising public revenues will be one that meets these conditions:

1. It should bear as lightly as possible on production — least impeding the growth of the general fund, from which taxes must be paid and the community maintained.
2. It should be easily and cheaply collected, and it should fall as directly as possible on the ultimate payers — taking as little as possible from the people beyond what it yields the government.
3. It should be certain — offering the least opportunity for abuse and corruption, and the least temptation for evasion.
4. It should bear equally — giving no one an advantage, nor putting another at a disadvantage.

This has been the general understanding for all forms of Taxation.
- Certain
- Equal & Fair

Seems HMRC have totally F**ked up on 2 out the 4 Canons. Totally pathetic idiots, with the Gold Plated Pensions

 

[MotoPL]

In terms of Vans, you are allowed to use them fir for ‘insignificant’ private journeys (eg making a slight detour to pick up a newspaper on the way to work. or the occasional trip to the tip). They are also allowed to park the vehicles at home as this is a more secure location and makes things more efficient.
Cars on the other hand you are not allowed to park the cars at home as they are allowed zero private use.

Thing is, if you're running a small business from home, as we do, with the van used for business only, where are you supposed to park it?!?

 

[chriscroft]

Thing is, if you're running a small business from home, as we do, with the van used for business only, where are you supposed to park it?!?

I think you would be fine as home=place of work; so imo not a problem

 

[WolverineMac]

Thing is, if you're running a small business from home, as we do, with the van used for business only, where are you supposed to park it?!?

Am I missing something or did I not say it's ok to park the van at a home address

 

[Paul Bishop]

Well when I pick up my new kombi van it will have a pipe rack as well as a roof rack. the nice new comfy seats are perfect for laying porcelain on (sinks toilets) for protection, so it isn't all about carrying passengers because it has seats, many of times I've laid sinks on the front seat for better protection(strapped in of course) also give me a car that can have a payload of over 1000kgs hence the reason why I went for the T32