pay vat or not?

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gaustin

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My first post on here so be gentle...
I have just ordered a new Bavaria,
The plan is to charter it out a bit hopefully 10 week ends @ £800 = £8000
So should I register for VAT and claim back the £10,000 vat i need to pay on the boat or should I just pay it and keep quiet about the whole affair regarding tax.

Year two, can I de register from vat so that I don't need to charge vat to my customers, but do I then have to pay the vat man for my boat

Thanks for any advice or links to usefull sites
Regards Guy
 
Most countries there is a minimum turnover to allow you to VAT register. Check what that is for the UK.
Once VAT registered if you try to de-register VAT man will look at you very carefully and my try to get VAT claimed back and you will have a fight on your hands.

It happened to me in SA I won one, lost the other (my yacht charter was the one I lost).
 
HM Revenue and Customs have lots of online info regarding when you can register for VAT and how to de-register.

Bear in mind that the compulsory registration threshold for sales is about £60k, so you would have to work hard to justify registration. You can de-register after a year, if you can demonstrate that you expect sales to be below de-registration threshold (about 10% less than compulsory registration). Usually some VAT will have to be re-paid by you. If they do not think it was a bona-fide business, they will probably want it all. Even worse, they may consider it fraud!

My advice, think very carefully! Talk to a decent accountant.
 
Registering for VAT is great, not only will you get the money back on your boat's cost price but also on all the work/extras that follow. If you are chartering her out, then there will be a steady stream of bits and bobs so we are talking good money.

I helped a guy put prices togther for a day-hire company recently, the VAT issue was a no brainer. What with online returns and stuff, it is not even that big a paperwork issue any more.

PS If you have customers hiring for a works do or similar, they will love getting a vat receipt.
 
I second this from experience. Do it legally and you will benefit from it. I talked directly to the C&E guys, they sent two inspectors who grilled me for a couple of hours, but gave me a clean bill of health: long may it continue.
Also note that you are not likely to make a profit on a one-boat charter business. This might have interesting "repercussions" on your relation to the IR. Speak to a good accountant. Choose one who has experience in dealing with related matters.
NB there is no "lower limit" for VAT registration, only an upper limit if you want NOT to register.
 
You mention it in your first message, but don't loose sight of the fact that you will have to charge VAT to your customers....

If your customers are corporate, then it is a non-issue for them - they pay a bit extra, then claim it back.

If your customers are private (or not VAT registered themselves), then you can look at it one of two ways... either

i) You tell them it will cost X, then charge them X+17.5%
ii) You tell them it will cost X, then give Gordy his cut of your income...

... either way, someone will be unhappy!

Basically, if you have more income than expenditure, then it will cost you... (you will be send Gordy his cut).

If you have more expenditure than income, then you will win out (but can you really justify calling this a business - surely it's a hobby!)

I have the feeling that most jobbing tradesmen are not VAT registered, for this very reason..
.
 
Although there is a compulsory VAT reg limit you can register voluntarily if you are a business. Your problem is that this is not entirely a business and therefore you have difficulty in claiming back all the VAT on the boat as it is partly for private use. When you deregister you will have to pay back the VAT on the value of the boat at that point.

If you register for VAT than Inland Revenue will want accounts of the business. Weekend charters are likely to be to individuals who won't want to be charged VAT. Personally I'd pay the VAT and pocket any charter money and not declare it as a business. You are allowed to recoup some of your costs without it being a business. A business is defined as a venture carried on with a view to profit. If you were challenged I'm sure you could persuade them that it wasn't a viable business because at that level you'd probably not have a taxable profit.

Is it worth chartering for such a comparitively small amount given the bureaucracy?
 
[ QUOTE ]
...I have the feeling that most jobbing tradesmen are not VAT registered, for this very reason.

[/ QUOTE ]

Or, perhaps, because they get paid mostly cash and have relatively low overheads. I am sure they declare all the cash they do get, of course. /forums/images/graemlins/smile.gif
 
[ QUOTE ]
Is it worth chartering for such a comparitively small amount given the bureaucracy?

[/ QUOTE ]

If you do it as a bonus income, to offset moorings and other fixed costs, then it should not be too bureaucratic....

Extra insurance, equipment and repair/maintainance costs and an all new provisoning/cleaning cost. Assuming you don't farm it out to a charter agent.

The biggest downside to VAT is if they decide to 'adjust' your claims for personal use, for that reason you will need a good accountant.
 
Thanks for the input. I think having to pay vat on the value of the boat when I de register is the clincher. Especially as Bavarias are due to go up 4% next month and another 5% next year. The value iof the boat next year may well be very close to what it is now.
Like you suspect it is a hobby and I just want the charters to pay for the mooring fees.
I think I'll just pay the vat now and pocket any charter money.

The less Gordy knows the better ;-)

Guy
 
I negotiated with the C&E inspectors how to make the "adjustment". I pay the VAT of whatever is my personal use. It is still definitely worth it. All above board and reclaim a significant amount of VAT on expenditures.... and don't forget the IR issues re loss-making business /forums/images/graemlins/cool.gif.
Get yourself a good accountant, I can recommend mine if you wish to PM me
 
[ QUOTE ]
...The less Gordy knows the better

[/ QUOTE ]

A sound plan, but do charterers pay in used five pound notes?

If you a pre-registered for VAT when you buy the boat, you get a cash payment that would probably cover your first years moorings and insurance. IMHO /forums/images/graemlins/blush.gif
 
Is it me or does something not quite ring true here OR conversely have we found a big tax (vat) loop hole?

1. I start a new company and register it for vat.
2. I buy a big brand new boat and pay the vat.
3. Because it's a purchase - I claim the vat back.
4. After 1 year I close the company and de-register from vat.
5. I walk away with the boat at net price.

If this is true - Why doesn't everyone buy new boats this way?

£300K boat = £52500 vat - that's some saving.

Am I missing something here!!!!!

Peter.
 
[ QUOTE ]
A business is defined as a venture carried on with a view to profit.

[/ QUOTE ]I think that you're thinking of a PARTNERSHIP, which is defined as a business carried on IN COMMON with a view to a profit.

As far as I'm aware you have to declare all of your UK source income, and non-UK source income for that matter if you're UK resident. Unless you know something different.
 
Yes, you're missing something. VAT liability's a bit like matter: only with difficulty can it be created or destroyed.

See Moodysailor's post above: "When you deregister you will have to pay back the VAT on the value of the boat at that point." This will always apply unless the value of such assets on deregistration is less than £1000 (at least that was the figure a couple of years ago).
 
This is simular to what I did except I already had a vat registered busness. When the VAT man did an audit on me he disallowed the vat I claimed back on my yacht within my current vat paying busness.

<span style="color:red">I had to pay the VAT back plus interest plus a fine.</span>

He tried it with another division and I won that as I could prove no personal usage.
It is possible but be <span style="color:red">VERY CAREFUL</span> it could cost you more in the end and you become a marked man with the taxman and therefore very difficult to push border line tax claims.
 
You do have to declare all your income but if some activity is just a hobby and you generate some income, but not enough to cover even a proportion of your expenses, then there is no profit and therefore no income.

If you are running a quasi business and keep making tax losses the IR will stop allowing you tax relief against other income after about three years unless you can show that this is a real business and that some profit will ensue eventually.
 
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