Claiming tax back on a company commerical vehicle

[ciarapm]

Hi,

My boyfriend works for his brother who has his own carpentry company.
In 2005 his boss, who is his brother convinced him to buy a Landcrusier and register it in the company name. My boyfriend pays back the €35,000 loan for the vehicle and pays the road tax but it is registered in his brothers name. When he bought it his brother told him that he would claim back the VAT and refund my boyfriend the money but now he keeps making excuses not to give it to him. How much would he be able to claim back and is there any restrictions on this, like if he goes to sell it in a few years does this need to be repaid?

 

[simplyjoe]

Hi,

My boyfriend works for his brother who has his own carpentry company.
In 2005 his boss, who is his brother convinced him to buy a Landcrusier and register it in the company name. My boyfriend pays back the €35,000 loan for the vehicle and pays the road tax but it is registered in his brothers name. When he bought it his brother told him that he would claim back the VAT and refund my boyfriend the money but now he keeps making excuses not to give it to him. How much would he be able to claim back and is there any restrictions on this, like if he goes to sell it in a few years does this need to be repaid?

Assuming a cost of 35K on a straight purchase he could have claimed 6K. On a subsequent sale the brother would have to repay roughly 17% of the amount received back to Revenue. From the wording of your question the whole thing seems highly illegal and I would suggest that your boyfriend should have nothing to do with it. Also IMO If you have to borrow the full amount of the vehicle you cannot afford it in the first place. Whats wrong with a VW caddy? It can do exactly the same job.

 

[Purple]

Hi,

My boyfriend works for his brother who has his own carpentry company.
In 2005 his boss, who is his brother convinced him to buy a Landcrusier and register it in the company name. My boyfriend pays back the €35,000 loan for the vehicle and pays the road tax but it is registered in his brothers name. When he bought it his brother told him that he would claim back the VAT and refund my boyfriend the money but now he keeps making excuses not to give it to him. How much would he be able to claim back and is there any restrictions on this, like if he goes to sell it in a few years does this need to be repaid?

I’m open to correction here but; If the car belongs to the company but your boyfriend makes the repayments then he is loaning money to the company. If he is a director then this money can be repaid tax-free. If not he is still owed the money but I'm not sure when the tax implications are. I don't see how BIK does not come into the equation here.
I agree with simplyjoe that the whole thing seems highly suspect.

 

[ButtermilkJa]

When a company purchases a commercial vehicle they pay the loan amount every month and then claim back the VAT element of this in their VAT returns every 2 months. So, for example, if the loan repayment is €575 per month, then the company can claim back €100 every month. That way they only end up paying the ex-vat price for the vehicle.

If your boyfriend is paying the loan amount every month, then, as mentioned, this is a loan he is giving to his brothers company to finance a company vehicle. Chances are he is paying the full amount, including VAT, and his brother is claiming back the VAT element for his business. Your boyfriend is entitled to full repayment of all the money he has given the company to pay for the vehicle so far.

Also, if the jeep is in his brother's company name as you mention, then as an employee he is only 'using' the company vehicle as part of his daily job. However, if he takes the jeep home every evening and uses it for personal use, then he is receiving a BIK (Benefit in Kind). This is calculated as 5% of the purchase price of the vehicle for commercial vehicles.

So, for example, if the jeep cost €35,000 then your boyfriend is deemed to receive extra pay of €146 per month and so he must pay PAYE and PRSI on this amount each month.

There are loads more details involved but this is the jist of it.

 

[dev88]

hi im just wondering can you claim vat back on a company commercial vehicle thats you bought second hand or does it have to be brand new? this may be a stupid question but im a novice in regards to this subject!

 

[Graham_07]

hi im just wondering can you claim vat back on a company commercial vehicle thats you bought second hand or does it have to be brand new? this may be a stupid question but im a novice in regards to this subject!

If
(A) your business is registered for VAT and
(B) the vehicle is a commercial vehicle and
(C) VAT has been charged to you on an invoice by the vendor and
(D) it's use is solely for the business
then yes.

 

[dev88]

grand thanks for that.....totally cleared everything up for me!

 

[ButtermilkJa]

Re: Claiming tax back on a company commercial vehicle

...
(D) it's use is solely for the business

Is it not possible to claim the VAT back even if there is some personal use? For example, buy the commercial vehicle for business use, claim the VAT back, but also pay the 5% BIK for the personal use.

 

[Graham_07]

Re: Claiming tax back on a company commercial vehicle

Is it not possible to claim the VAT back even if there is some personal use? For example, buy the commercial vehicle for business use, claim the VAT back, but also pay the 5% BIK for the personal use.

That would be correct in a ltd company purchasing the vehicle. For a sole trader ( bearing in mind that some posters here sometimes misuse the term "company" meaning any business , ltd or otherwise) personal usage would have a bearing on the % claimable.

Where a lot of people come unstuck is when they are disposing of the vehicle a few years on they forget about the VAT due back to Revenue on the value on disposal.