Company Boats

amf

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Having a small but growing company, and a small and not growing boat, I was wondering who on here puts their boat through the business?

If so, I assume you can claim VAT back but you are hit with the whole amount as a taxable benefit? Any (ahem) efficient ways of doing this?

I have heard of people using an offshore company for making the purchase but assume this is only worthwhile for more expensive boats.
 

BlueChip

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I looked into this some years ago but my accountant advised against it.
What you can do however if you use your boat for customer/staff entertaining is to charge the company a daily rate for the use of your boat. As a raggie we use the Sunsail published daily charter rates as a basis of our claim, no doubt there are similar mobo charters you could use
 

snappy

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Hi Andrew. I would be cautious about this. My ex was a VAT person and I know they took a very dim view of reclaiming VAT through a company for what was essentially a private boat. Accountants will tell you to claim that you use the boat for corporate hopitality but unless that is your main business its a risky strategy
 

itsonlymoney

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I too have looked into this and have also been advised against. I imagine "corporate entertainment" scenario would only work if your company was large and could actually justify use as the above. I have however heard of a pro photographer who had his trading name on the boat and claimed an amount for "advertising" and photo shoot days. How successfull his claim was long term I am not sure.
Ian
 

kingfisher

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Writing the boat off on the company is probably as difficult in the UK as it is here in Belgium. Things that might work:
- if your car is a Volvo, alledgedly an invoice from a Volvo Penta dealer could be booked as a repair or maintenance of the car; an oil filter change is an oil filter change.
- buy sails and invoice them as tarpaulins for your trucks
- invite clients/business relations/employees on the boat and deduct the days: a friend of mine /forums/images/graemlins/wink.gif chartered a catamaran in Italy last year, with eight friends, one of which was a business associate. He deducted all the flight costs and 50% of the charter invoice.

This are obviously all ficticious examples. The difficerence between tax evasion and tax deduction is:
a) a good accountant
b) whatever the IRS decides
c) 3-5 years in jail
d) all of the above
 

jfm

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The charge made to the company is tax deductible for the company, but taxable as income for the boat owner personally. So, leaving aside any special circumstances (like you have no income so still have some spare allowances, which wouldn't be the case with most folk) what does this achieve?
 
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Deleted User YDKXO

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Many years ago it used to be possible for a company to own a boat for 'corporate entertaining' purposes but the IR clamped down on this. However, it is possible to own a boat thru a charter company. In fact some dealers are getting wise to this and are even offering to set up schemes for prospective buyers in order to sell a boat. For example Trader are advertising 'Free Boating'. The arrangement is basically as follows

1. Get a good accountant
2. Set up a subsidiary company of your main company for the purposes of owning a boat and offering it for charter
3. Buy a boat. Your accountant will negotiate with HM C & E what proportion of VAT can be reclaimed depending on your estimated private use. Normally about 80% can be reclaimed
4. Offer your boat for charter and be prepared to prove that you are actively doing so
5. Put all running costs thru subsidiary company and claim back agreed proportion of VAT
6. At end of year, subsidiary company will have made a loss especially when accountant applies capital allowance
7. Subsidiary company loss set off against main company profit to reduce taxable profit
8. Accountant negotiates benefit in kind for personal use with IR. This is normally based on no. of days you used boat in year with the assumption that remaining days available for charter
 

jfm

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Deleted User, with respect, you have to be very careful of accountants. Some of them are not very good

The scheme you mention is fine (for UK only) except it involves a stupid self inflicted own goal, ie putting money into a company to buy a boat then suffering BIK tax AND VAT when you use the asset (boat) bought with that money

That structure is much better if you buy the boat on a timeshare joint venture with the company. Company buys 80% of the boat (to use your %) and you buy 20% personally. Company reclaims 100% of VAT on its 80% as before. But when you use the boat privately there is no BIK nor any VAT becuase you are using your own 20% personal share privately. The capital allowances are lower than under your scheme but the saving in BIK tax and VAT more than outweighs that effect
 
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Deleted User YDKXO

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Who said anything about using personal money? Yup, I agree this is not a scheme for your average High St compliance accountant who would run a mile. You would need accountants who specialise in tax planning. As I said Trader offer to set up this scheme as part of a sale. They told me they have several owners who operate their boats in this way out of Majorca. The boat purchase itself is invoiced by their UK company in order that VAT can be more easily reclaimed and I believe that owners even receive some invoices for mooring and maintenance costs through the UK. They gave me quite a well written booklet at LIBS explaning how it works. If anybody wants a copy, just PM me
Agree your JV scheme looks good but I wonder whether IR would try to treat personal 20% as a loan to company
 

jfm

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Still works ok. Let's say all the boat buying cash is inside the company. Company can lend the 20% to you personally, if you prefer not to take it out as bonus/dividend. In that case the annual tax leakage is 40%tax x 5%official loan tax x the 20% boat price

That's still much cheaper than the Trader method, which has annual tax leakage of :

40%tax x 20%private tax factor x 20%boat price, for BIK; and

17.5% x 20%private tax factor x 20%boat price, for VAT
 
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Deleted User YDKXO

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Not sure if BIK worked out that way but take your point
 

Howardnp

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As a humble high street accountant.. :)

What may be worth considering is letting the company buy the boat using company money, then giving it straight to the director.

OK the director suffers a benefit in kind but his cost is the tax element. So he's effectively paying for his boat at a lower cost (only the tax) out of his already taxed income. The company gets tax relief on the purchase as long as the gift to the director is declared as a BIK.
Works - done it.
However, individual circumstances etc have to be considered and this forum ain't the place to do it, or come up with any clever schemes as you don't know who is reading the stuff....paranoia setting in!!
The idea of a subsidiary company is not too clever because as soon as you create the subsidiary it has an impact on corporation tax thresholds for the main company as well as the subsid...

Be careful of loans to directors as well...too easy to forget to make the returns etc etc The robber barons at the IR don't particularly like them and corporate entertaining costs aren't allowed as tax deductable items either.
Difficult to justify advertising as you would probably have to justify a tangible benefit to the company, merely having the company name somewhere on the boat would probably not do.

Good luck..
 

amf

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OK, so if we use £100k as purchase price inc VAT for ease of calculation:

1. Take Dividend of £20K (net)
2. Pay for boat using £80K of company money / £20K own money
3. Company claims back VAT on its £80K
4. You then have to Charter it on an 80:20 ratio (business:private)?

Presumably accountant would have to agree the ratio to IR and prove the ratio on personal tax return?
 

amf

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So the company buys the boat (say £100K ex VAT). Company gifts boat to Director. Director pays 40% of £100K as BIK? and company can claim £100K of tax relief - and that's that? /forums/images/graemlins/confused.gif
 

amf

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Hi Larry,

Yes, have also been advised the same. Just wanted to see what other people do/advise and compare to our accountants generally conservative attitude.

Have you used those Snap Davits in anger yet?
 

jfm

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Eh?

Howard that is absurd. It achieves no tax advantage at all. If the company buys boat out of company money and gives it to director, that is precisely the same as company giving the money to director (as a bonus) then the director buys the boat himslef. There is no VAT saving, either. Ok the company gets tax relief for cost of boat, but it would get same tax relief if it paid a cash bonus

You say "Works - done it". Eek.....
 

jfm

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Yes, except

1. could be dividend or loan or bonus. Loan is most tax efficient usually. Loans are no a problem, I dont agree Howard P's suggestion to steer clear of direcotr loans and the Revenue "dont like them". I'm not trying to make the Revneue happy.

2. Not quite. The company has an 80% time share and offers all that for charter. !00% of charter income thus belongs to company. You have a 20% time share and just use the boat say 71 days per year.

This 80/20 is not set in stone, just using those figures as Deleted User originally mentioned them. But yes, as you say, they would have to match up with reality resonably closely. 20% is every weekend in the season however, so probly a good guideline
 
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