Tax deductible

[kingfisher]

Come on then, out with the fancy tricks.

I started my own business in July (yes, the world needs another consultant). Things are going ok, insofar as my accountant is advising me to spend more to avoid a higher tax bracket.

Now there's nowhere easier and more fun to spend a lot of money than on my boat. But according to my accountant, that's not a business expense, and therefore not deductible.

How do you claim expenses for the boat as business expenses, and thus tax deductible ?

Real life suggestions received so far
1) Own a trucking company. Buy a new set of sails, and have them itemised as a tarpaulin.

2) Rent your own boat for incentives

How do you incorporate your boat in your business?


The difference between tax avoidance and tax evasion is
a) whatever the IRS says;
b) a smart lawyer;
c) ten years in prison;
d) all the above
(Gene Hackman, "The Firm")

Group of people on the pontoon: skipper is the one with the toolbox.
http://sirocco31.tripod.com

 

[bedouin]

The best way is to charter it out occassionally - and there are a few companies that will charter out owner boats like this. This is of course subject to lots of conditions - the boat has to be coded and the like.

You could probably get away if you used it regularly for business entertaining as well.

Don't know what would happen if you stuck your logo on the side and entered it in Cowes week - you might get away with calling it Marketing!

As an aside - if you do own the boat through the business and then use it for personal use, you could be liable for tax as a "benefit in kind"

 

[tcm]

um yes ...good ideas ish.

The marketing thing. Essentially the taxman has to able to see that it is indeed a good idea. So, for example, if it transpires that lots of your custoers are a bit boaty, then entirely reasonable to buy sign for boat and float around during cowes week. You put down cost of sign, um some berthing in cowes and er what else? Small company, its your boat innit? ok so you could put down 1/52 of all the annual costs , big deal.

Easy wheeze with small compnay is to pay all the bils and cough to the benefit in kind: at least this saves the NI. Yes, all food , school fees, the whole lot.

Also you can employ your kids a bit as company mascots for so much a week (under the threshold) getting another tax allowance there.

the chartering out os the boat is ok. I know someone who has a gred a deal whereby the charter co can rent the boat in exch for free berthing - which means that berthing is tax free.

Failing all this, re-reister your company in the Turks and Cacos. No need to produce accounts for the first ten years, so liquidate every nine.

 

[Guest]

From what i hear, the most tax efficient way is to set the boat up as limited company charter business, register it for VAT, then buy the boat new (VAT back).
All expenses associated with the general maintenance, storage, etc can be offset, as revenue costs. This includes fuel, moorings, fitting replacements, and the cost of having it DOT coded for charter. (No bad thing - means it's safe to take out bods, proper lifejackets, flares, liferaft etc ) Also, you can legitimately amortise the capital costs of the venture - thats the boat itself, sails etc.
Provided the thing loses money, and you have to lend the business the money to start up with, you are entitled to have your loans repaid, tax free (Check that bit though), i also believe that that can be in kind. IE - You shouldn't have to pay tax on the sailing you get to do.
You will need a good accountant, and keep ltd co. records, but a bit of practice in Excel, and that's sorted.
If you are prepared to run the charter business youself, and therefore be very choosy about whom you permit to use it, there is no reason as to why it should get trashed. (I wouldn't charter it to me, then)
Otherwise - stick it out for a limited management deal perhaps?

 

[jfm]

Some of what you say Nick seems OK, but not the bit about using it personally, tax free. That's the difficult part, you cannot use it for your own personal sailing, tax free.


If you want to go this route the best (legal) methods are:

Do everything you say, but ensure the company doesn't make the boat available for your personal use except when you actually want to use it. This avoids tax on availability. Remember, tax on private use of a company asset is based (using a 20% x capital cost per annum formula to calc the BIK) on how long its available to you, not how long you actually use it. So write a quick board minute each Friday b4 you use the boat, saying it's available to you till Sunday at 7pm, no longer, and file it. So, if you sail say 20 weekends a year = 40 days in a £100,000k yacht, the taxable benefit is only 20% x 100k x 40/365. That's £2k, so the actual tax cost is £800. Each year. That's not bad if you have recovered £17,500 in VAT. That's the end of the benefits - there's nothing else apart from tax relief for interest on your capital contributed to the company, though you're pushing your luck there

Or: own the boat in a partnership (I mean in the legal sense, not a bunch of mates). A limited partnership is best. UK, Jersey or Cayman law especially good here. The partners would be you and a company set up by you. The partnership runs a charter business. But the private use of the boat is something you receive qua partner, not qua director of a company, so not cort by BIK rules. If the boat is to be registered, you wd need to reg in IoM or Bermuda, becuase UK and Bahamas do not like partnerships as registered owners

 

[bedouin]

In practice if the boat has a genuine business use you are unlikely to be chased for tax on the benefit in kind. I had this set up (a few years ago now) where my company owned the boat and chartered it out, and I used it when I wanted. Both my accountant and IR seemed quite happy with this and there was no suggestion that I should pay tax.

However in that case the boat did have a genuine income stream that at least covered its running costs. If it were blatantly an attempt to avoid/evade tax then IR can get you by taxing you on its use

 

[rogerroger]

Re: Tax deductible - good luck

Mr Customs & Excise aint going to fall for that - a charter company that makes no money being VAT registered to claim the VAT back. You've got to be turning over what £54 k pa before you have to be VAT registered.

Correct me if I'm wrong - but you'll pay the VAT surely, then claim it back in your quarterly return? (that's how it works with my Ltd co.)

And as for chartering, you'll need to comply with - whatever the standard is - so that'll cost you along with the additional insurance.

I think the most effective thing is a sh*t hot accountant who can get this through. Things like adverising, if you're genuinely advertising, say at Cowes week by mincing about in your yacht covered in your company logos then that might fly, or if you conduct business on your yacht...

If it was that easy we'd all be doing it!



/forums/images/icons/cool.gif Roger Holden /forums/images/icons/cool.gif
<A target="_blank" HREF=http://www.first-magnitude.co.uk>First Magnitude</A>

 

[spark]

Use the boat as an office for your consultancy business? Claim back 5/7 of the overheads (i.e. 5 days out of 7).

 

[halcyon]

Well first you need to get into the design and manufacture of marine electronics, the boat is owned by the business as a test bed for equipment. Come spring, you enter on a spring/summer marketing initiative, touring all the south coast ports, with a mobile exhibition (ie boat fitted out with all your equipment ) for chandlers, local marine electricions, and boat builders. Then you have to entertain them at lunch time and evening.
Come October you need to carry out a refit over winter for next years exhibition circuit.

Should cover most items.

Brian

 

[andy_wilson]

Re: Tax deductible - good luck

Being a VAT registered sole trader appears a better option.

Regardles of 'main' business, if you are a sole trader YOU are a VAT registered entity, therefore if you buy a boat and genuinely set it up for business you are entitled to VAT reclaim and of course capital allowance (which at 40% in year 1 means you are gona have to be earning plenty to pay tax with 40% (£40,000) paper loss on a £100,000 yacht.

Conversly you are also required to charge VAT on all your business activities.

 

[jimboaw]

Have you considered useing your boats marina address on your business cards as your primary address? The boat as a "mobile office" is an attractive idea! Good Luck.

 

[kingfisher]

Oooh. Good One. NM.

No Message

Group of people on the pontoon: skipper is the one with the toolbox.
http://sirocco31.tripod.com

 

[tcm]

Re: Careful.

The idea of using a 100k+ boat instead of a 50 quid a week office onshore could result in the difference being taxed as a benefit in kind. Unless you can show that it's needed in the course of your business.

 

[FlyingSpud]

What about the marina, they will not be happy as this will invalidate the insurance and so they will say no. If you try and keep it quiet, you will have no insurance.

 

[jimboaw]

Re: Tax deductible (Flying Spur)

Sure, we are all aware that ins. co's. will use any tactic they can to aviod a payout in the event of a claim but we also know that hundreds of self employed "live aboards" in marine related trades use the boat as an "office". What is an "office" for a self employed consultant anyway other than a mail box a phone line and a desk in the lounge at home? As for being charged for a benefit in kind when you take your "office" for a day sail around the Solent, since when were boats fitted with Tachographs?

 

[jfm]

Re: BIK rules

Bedouin, you must be going back several years (10+?). Now, the law is quite clear - if a company asset is made available to a director/shadow director/employee for personal use, the BIK is 20%pa of the cost of the asset. Doesn't cover cars of course, special rules for them. That's the law, full power to your elbow if you have managed to negotiate some better deal!

 

[jfm]

Re:No-ne said Lester Piggott rules applied

Ahhh, hang on a minute Jimboaw, I didn't understand the rules. If the game is how to pay the least tax using among other things lying and cheating, then everything's different. But why involve your pride and joy, the boat, and it's insurance arrangments? Why not just lie about your business profits, put your cash on deposit in Switzerland numbered account, and keep the boatie arrangements squeaky clean?

 

[tcm]

Re: special rules for cars

A little-publicised backwater of the car tax regs certainly used to cap the value at £80k. In others words the sliding scalewent all the way up to 80k - but not beyond. So, if a car cost £100k or even £300k - its was still taxed as though it had a value of only £80k. Wonder if this still applies of if the new owners of rr or bently or AM have lost their influence...