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bigduckontax
bigduckontax, Accountant
Category: Tax
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The company purchased a car member of staff who was paying

Customer Question

The company purchased a car for a member of staff who was paying for its cost with a monthly payroll deduction. The car was in the company's name as was agreed while it was being paid for and the staff member completed his probation period. The staff member was responsible and contracted and paid for the insurance himself. The car was written off in an accident not his fault. The staff member paid for the balance he owed us on the car from the insurance settlement. The car rental company who supplied the rental car while this was being sorted is claiming that as the company nominally owned the car, it is liable for the VAT portion of the car rental, some £800 and it is no big deal as we can claim it back. My view is the company did not incur the expense and thus can not claim the VAT. The insurance contract and thus all the dealings related the car rental are between the individual (not VAT registered) and the insurance company only and thus the third party insurance company is liable for the VAT not me. Am I correct in my view? Regards ***** *****
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello Dave, I am Keith one of the experts on Just Answer and pleased to be able to help you with your problem. In my opinion the car rental company are quite correct in charging VAT on the replacement hire as indeed your organisation is in reclaiming same as input tax. The car is effectively akin to be being bought on a hire purchase agreement from the company and thus technically the company's property until the debt is paid off. I am in exactly the same position with my own car which is on a contract hire cum hire purchase from a local motor dealer. It is mine if I want in four years, but I am still responsible for road fund tax, maintenance and insurance in the interim. It is not mine although with DVLA I am still the registered keeper. Just reclaim this VAT as input tax Dave and don't worry about it any more. I do hope that my answer has cleared the air for you.
Customer: replied 1 year ago.

Thank you for that and yes it is a form of hire purchase. I guess the only additional bit is that the car is not and has not been registered for VAT due to use and we did not claim the VAT on it when it was purchased. Does that change the picture as it feels not right. Dave

Expert:  bigduckontax replied 1 year ago.
Not at all, but you could still reclaim the original purchase input tax, but, of course, you would have to charge VAT to your employee on his purchase.
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bigduckontax, Accountant
Category: Tax
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Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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