Sort of VAT help please!
Discussion
A friend of the wife is fairly bad with financial things and i have no clue so i am asking the PH gurus for a bit of guidance!
He currently has a van that he uses for his business (he isn't VAT registered) and this was financed through a VW Lease Purchase.
He now wants to get rid as he is looking to semi retire, and is looking to sell it back to the dealer. He got a settlement figure emailed from VW but it is a total rather one with VAT separated but he is 100% convinced that the total includes VAT.
Upon speaking to the dealer they have offered him a price slightly lower than the settlement and they are saying that they won't be adding VAT as it is not a vat able vehicle?
He has now also spoken to another couple of dealers and they have offered a price for it + vat
So, are they correct? I would assume that the vehicle still belongs to VW finance and if the dealer paid them the settlement figure that VAT would be included in the final figure and the dealer would pay x amount plus VAT leaving a bit of profit to go back to the 'hirer'?
He currently has a van that he uses for his business (he isn't VAT registered) and this was financed through a VW Lease Purchase.
He now wants to get rid as he is looking to semi retire, and is looking to sell it back to the dealer. He got a settlement figure emailed from VW but it is a total rather one with VAT separated but he is 100% convinced that the total includes VAT.
Upon speaking to the dealer they have offered him a price slightly lower than the settlement and they are saying that they won't be adding VAT as it is not a vat able vehicle?
He has now also spoken to another couple of dealers and they have offered a price for it + vat
So, are they correct? I would assume that the vehicle still belongs to VW finance and if the dealer paid them the settlement figure that VAT would be included in the final figure and the dealer would pay x amount plus VAT leaving a bit of profit to go back to the 'hirer'?
If he’s not VAT registered I don’t think he will be able to sell it to the dealers +VAT.
The dealers would be expecting to recover the VAT they pay him, think he needs to tell the dealers he is not VAT registered, which might have quite an impact on what they offer him as they won’t be able to sell it on & add VAT
The dealers would be expecting to recover the VAT they pay him, think he needs to tell the dealers he is not VAT registered, which might have quite an impact on what they offer him as they won’t be able to sell it on & add VAT
Thanks Andy,
I think this is where he (and I) are getting confused.
He is thinking that if the dealer settle the finance direct with VW, they would issue the dealer a VAT receipt for the settlement, and not him?
If for example he had a settlement figure from VW for £24,000 all inc, the purchasing dealer would be paying £20,000 plus vat as they are the ones that are VAT registered?
No money in effect will be going through his business apart from the small profit he would make, as the dealer would be paying VW direct.
It's all bloody confusing to me.
I think this is where he (and I) are getting confused.
He is thinking that if the dealer settle the finance direct with VW, they would issue the dealer a VAT receipt for the settlement, and not him?
If for example he had a settlement figure from VW for £24,000 all inc, the purchasing dealer would be paying £20,000 plus vat as they are the ones that are VAT registered?
No money in effect will be going through his business apart from the small profit he would make, as the dealer would be paying VW direct.
It's all bloody confusing to me.
My guess is
VW finance will have stated a settlement figure, eg £20k+VAT which is £24k
If the buyer is willing to pay £25k, then £24k will go to VW finance and £1k to your mate.
If you make it clear to the buyers what the settlement figure including VAT is, then they can quote accordingly to remove any confusion.
VW finance will have stated a settlement figure, eg £20k+VAT which is £24k
If the buyer is willing to pay £25k, then £24k will go to VW finance and £1k to your mate.
If you make it clear to the buyers what the settlement figure including VAT is, then they can quote accordingly to remove any confusion.
spikeyhead said:
I'd be amazed if the dealer didn't insist on paying off the finance directly.
No-one is going to pay £25k, take in the car and hope that the finance is paid off
Yes well that is the question really.No-one is going to pay £25k, take in the car and hope that the finance is paid off
If the dealer paid it off directly to the the finance house, would the dealer be able to reclaim the vat on the purchase price of the lease purchase plan, even though our friend is not vat registered?
He has had low ball offers from a dealer who said they cant claim it (an offer that is under the settlement figure), but better offers (plus vat which) from those that can (which gives about 1k profit), and the low baller is stating that he cannot claim the VAT on the purchase as our friend is not VAT registered?
Who ultimately repays the finance company is irrelevant.
Lease purchase is like a hybrid of a HP and PCP agreement for commercial vehicles, there is a balloon payment but it has to be paid - you can't simply hand the van back.
On a lease purchase the van was sold to, and is owned by the friend. The lease purchase agreement is a loan secured against the asset, the finance house are not involved with the VAT element at all. It's not like a conventional lease where the asset remains the property of the finance house. There is therefore no separate VAT element to the settlement figure.
As the friend is not VAT registered he could not reclaim the input tax at the point of the purchase and therefore VAT has been paid on the vehicle and cannot be charged when he sells it on - and regardless of the finance, the transaction is between the friend and purchaser.
Dealers like VAT qualifying stock because it lowers their purchase cost, and as they are mostly selling to VAT registered customers they see the VAT doesn't cost them anything in real terms. There is no incentive for either party to pay more than the value excluding VAT for the van.
Incidentally when the dealer sells it on, they can charge VAT on it (if they choose to not to use the margin scheme on that sale), which if they're selling to a VAT registered customer it's actually in their best interests to do so - assuming they're selling at a profit.
Lease purchase is like a hybrid of a HP and PCP agreement for commercial vehicles, there is a balloon payment but it has to be paid - you can't simply hand the van back.
On a lease purchase the van was sold to, and is owned by the friend. The lease purchase agreement is a loan secured against the asset, the finance house are not involved with the VAT element at all. It's not like a conventional lease where the asset remains the property of the finance house. There is therefore no separate VAT element to the settlement figure.
As the friend is not VAT registered he could not reclaim the input tax at the point of the purchase and therefore VAT has been paid on the vehicle and cannot be charged when he sells it on - and regardless of the finance, the transaction is between the friend and purchaser.
Dealers like VAT qualifying stock because it lowers their purchase cost, and as they are mostly selling to VAT registered customers they see the VAT doesn't cost them anything in real terms. There is no incentive for either party to pay more than the value excluding VAT for the van.
Incidentally when the dealer sells it on, they can charge VAT on it (if they choose to not to use the margin scheme on that sale), which if they're selling to a VAT registered customer it's actually in their best interests to do so - assuming they're selling at a profit.
Gassing Station | Business | Top of Page | What's New | My Stuff