Finishing Van Finance

[LargeD]

Hi All,

Question on behalf of my father.

His lease agreement with Citroen finishes in August this year and he's asked me to help him go through the T&C's with him.

Due to the tax implications he can't simply buy the van, he options given are part ex against a new van, secondary lease or sell to a third party.

He needs the van and as its still going well (despite being French) he would like to keep it.

Can he "sell" it to his friend for full market value, then buy it back? This was his plan, but I'm worried there may be tax implications as if this was OK surely this would be an option from Citroen.

Obviously he can enter a secondary lease for the equivalent of a current months rental per year, but over a year this is obviously more expensive and moves the issue to the future.

Appreciate any advice if anyone has experience of this, thanks.

[Patch1875]

I have never had an option to obtain my peugeot van (would assume same as Citroen) direct from peugeot the 2 option they gave me was

- track the van and buy at Mannheim auctions
- visit a dealer and buy it through them (adding on there massive fee)

[broadslide]

Your supplying dealer should act as the third party for no charge, especially if you make noises about buying another one in the near future.

[Egbert Nobacon]

LargeD said:

I'm worried there may be tax implications.

As he has (in the eyes of HMRC) gained a tax benefit because he took a vehicle on a finance lease, he technically cannot then be seen to own the asset later on - a having your cake and eat it scenario.

The risks are that HMRC could possibly at some point ask him to repay any tax benefit he gained through having the lease.

The reality is that it goes on all the time and the likely hood of getting caught is fairly slim but it does exist & HMRC are wise to all the shenanigans that can go on at "end of lease"

If the third party sale route is chosen, do ensure you use current market value and don't forget the VAT.

Why not just keep the van, pay the annual "peppercorn" rental (an element of which can be offset) until such time as the van dies or he's fed up with it. He may not technically own it but it's his for all intents and purposes and he has no risk of recourse to HMRC.

Edited by Egbert Nobacon on Saturday 26th April 15:25

[TooMany2cvs]

LargeD said:

Due to the tax implications he can't simply buy the van

He _can_ buy it, he just _prefers_ not to because of the "tax implications".

LargeD said:

Can he "sell" it to his friend for full market value, then buy it back?

If he "can't" buy it, then he doesn't own it in order to sell to his friend. The lease company might be up for selling it directly to the friend, but they're far more likely to just shove it to auction once it comes off lease.

At a guess, the "tax implications" referred to are because he's not VAT reg, so would have to pay the VAT on the end-of-lease asking price, right? If so, then if the friend is VAT reg, he'll actually hand the VAT inclusive price over to the lease company, then reclaim the VAT - but when the friend then sells it back to your old man, the VAT would be chargable again. The only way for your old man to own it without paying the VAT is to be VAT reg himself, and reclaim it - then he charges VAT on it when he eventually sells it on.

[LargeD]

Egbert Nobacon said:

LargeD said:

I'm worried there may be tax implications.

As he has (in the eyes of HMRC) gained a tax benefit because he took a vehicle on a finance lease, he technically cannot then be seen to own the asset later on - a having your cake and eat it scenario.

The risks are that HMRC could possibly at some point ask him to repay any tax benefit he gained through having the lease.

The reality is that it goes on all the time and the likely hood of getting caught is fairly slim but it does exist & HMRC are wise to all the shenanigans that can go on at "end of lease"

If the third party sale route is chosen, do ensure you use current market value and don't forget the VAT.

Why not just keep the van, pay the annual "peppercorn" rental (an element of which can be offset) until such time as the van dies or he's fed up with it. He may not technically own it but it's his for all intents and purposes and he has no risk of recourse to HMRC.

Edited by Egbert Nobacon on Saturday 26th April 15:25

Appreciate the reply and that is exactly my thinking also, hence asking the question in the first place. He'll be continuing with the rental until it goes pop.

[LargeD]

TooMany2cvs said:

LargeD said:

Due to the tax implications he can't simply buy the van

He _can_ buy it, he just _prefers_ not to because of the "tax implications".

LargeD said:

Can he "sell" it to his friend for full market value, then buy it back?

If he "can't" buy it, then he doesn't own it in order to sell to his friend. The lease company might be up for selling it directly to the friend, but they're far more likely to just shove it to auction once it comes off lease.

At a guess, the "tax implications" referred to are because he's not VAT reg, so would have to pay the VAT on the end-of-lease asking price, right? If so, then if the friend is VAT reg, he'll actually hand the VAT inclusive price over to the lease company, then reclaim the VAT - but when the friend then sells it back to your old man, the VAT would be chargable again. The only way for your old man to own it without paying the VAT is to be VAT reg himself, and reclaim it - then he charges VAT on it when he eventually sells it on.

Just to clarify, Citroen give 3 options when the lease ends - p/x against a new van, continue lease at significantly reduced rate or sell to an unconnected 3rd party.

The stipulation of "unconnected 3rd party" was what raised the question in my mind, as this seems too specific to have an easy work around - he's VAT registered so that shoukdn't be a problem. If there's a chance it could lead to issues in the future it's not worth it, as the annual rental is the same as a months current lease.

[TooMany2cvs]

LargeD said:

Just to clarify, Citroen give 3 options when the lease ends - p/x against a new van, continue lease at significantly reduced rate or sell to an unconnected 3rd party.

Ah, the "due to tax implications" statement made me think it was an option, just one he didn't want to take.

[Chipchap]

There will also be a clause in the sale side that states that he needs to pay Citroen Finance a % of the sale proceeds assuming that this is a "Financial Lease" and this is normal. Most people will not have read this at the outset so be careful. It will be between 5 & 10% so if he sells it to an unconnected 3rd party at £3000 then he will need to pony up c£300 to Citroen for the pleasure.

A