Cali as our business vehicle?

[Pipster40]

Hi, our first post as we are in the process of ordering a Cali for our business. We run a small children's book publishing company and need it for sales trips to tourist hot spots / literary and cultural festivals / client and illustrator visits to present and sell the books we produce.
Looking at HMRC, it appears that motorhomes are considered commercial vehicles and the VAT can be claimed (https://www.gov.uk/reclaim-vat/cars), but has anyone out there done this. It would be for business use, as we have a car for private use, so also wondering if there is any Benefit in Kind to be paid?

Any advice would be much appreciated - the Cali is perfect for what we do, as at events/car boots etc it pulls people in to see the books (I think the opposite is true if you just had the back of a transit opened!

Thanks!

 

[MattBW]

http://vwcaliforniaclub.com/threads/is-the-cali-a-commercial-vehicle.3098/#post-99863

Might be useful.

 

[snowy55]

Welcome to the forum, now don't get me wrong but before you spend many tens of thousands of pounds don't you think you should get professional advice about this, not the opinions of well meaning members of the general public. Get this decision wrong and it could be a financial disaster.

 

[Pipster40]

Hi Snowy55, yep we have done that with our accountant and through checking HMRC and the inland revenue. Both seem to concur that it is fine (because it will be 100% business). Was asking on here as often first hand advice of someone else who may have done this is invaluable. And DVLA seems to contradict HMRC in definition of the Cali...

 

[snowy55]

So long as professional advice has been sought then you can base your decision on that.

 

[F5 JNR]

It works...we each have our own vat registered business, my wifes is 1 mile away so little business use other than claiming vat on diesel. However I may travel 20,000 miles per year business including overnight stops so we put 10% on wifes business, 40% through my business leaving 50% as personal use for the kids. Maybe halves the running cost? Anyway hope this gives you some ideas?

 

[motacyclist]

One alternative to put some of the costs through the business is to claim fixed profit car allowance. This is currently 45 pence for the first 10000 miles and 25 pence thereafter. No complications with HMRC other than having to keep business mileage records.

Alternatively sell the Cali and (rough it a bit) buy a combi Transporter with seats and windows, fit it out with those pod thingies and a pop top. You can claim the VAT back and just pay the BIK on a van.

 

[Pipster40]

It works...we each have our own vat registered business, my wifes is 1 mile away so little business use other than claiming vat on diesel. However I may travel 20,000 miles per year business including overnight stops so we put 10% on wifes business, 40% through my business leaving 50% as personal use for the kids. Maybe halves the running cost? Anyway hope this gives you some ideas?

Thanks F5, so do you get crippled by benefit in kind? Our acct says the VAT isn't a problem, but I'm struggling to find the actual costs pa if any personal use was claimed (likely 10%).

 

[Cameron1960]

Hi Pipster, we went through a similar process. We have a VAT registered retail business where we intend to use the Cali as a delivery vehicle. After in-depth discussions with our accountant he assured us the whole process would be acceptable to HMRC. The Cali was purchased via a 3 yr PCP through VW Finance. One note of caution though, numerous and I mean numerous, insurance companies will not insure the vehicle for Class 2 business use (due to the vehicles definition), it took me a couple of days to get a sensible quote. If you have problems try 'The Insurance Factory 01246 216350'.

Good luck

 

[jts46]

Used mine for business use for 4yrs before retirement and no problems.

John

 

[Pipster40]

Thanks Cameron and John, this is reassuring. It is the perfect vehicle as the idea was to visit campsites that had substantial shops as well, and then pitch the kids books to them for sale in their stores. Lots of families with babies and toddlers that need entertaining. I think we will take the plunge and then see how the BIK pans out. That was my main concern as there is conflicting information on whether it can be viewed as a van or a car for BIK...

 

[sdes]

My accountant advised me that:

Unless it was to be 100% business use I would not be able to reclaim any VAT. With the best will in the world, I think you will struggle to convince the VAT man this is the case.

As I was buying an older vehicle, I would be charged benefit in kind against its value when new, clearly this doesn't apply so much if you're buying new, but if you keep it several years, the value drops and you still pay top dollar "tax"

The California does not qualify as a commercial vehicle as too many seats relative to load space, can't carry enough weight etc, so that route to VAT reclaim as on a transporter van doesn't work.

He suggested I buy my California personally but put 80% of running costs through the business - actually all of it but then repay my personal use portion. That way you get the VAT on fuel, servicing etc reclaimed. You pay your personal bit including the VAT as personal use isn't VAT reclaimable.

I know this doesn't quite fit with a new vehicle, but some might be useful to you, and the rest to others hopefully.

Hope you enjoy the vehicle / mobile shop.

Stephen

 

[Pipster40]

Hi Stephen,

Thanks for the information. I believe we will be putting it through as 100% business use. Our acct has investigated it in depth so we will have to see how it all pans out. Friends outside this forum mentioned that they had their vehicle as a pool car which attracted smaller BIK. For the VAT on the vehicle purchase, which is a separate issue, it appears to qualify according to HMRC.

Best

Phil

 

[Skylark2.0]

Safeguard will insure a Cali for business use. Very few others will do it

 

[motacyclist]

LV has insured ours for business use. I found them through the Meerkat site. Simples!

We got a free toy as well, grand daughter was made up

In fact, you can specify you want business use on the Meerkat site when you fill in the details, then only insurers who offer this are listed. There were quite a few ...

 

[Iain Brydon]

Hi

My accountant have very similar advice to that of Stephen. Re VAT if you are on the flat rate scheme you can claim back VAT if it is VAT qualifying vehicle (new of only owned by a VAT reg business) regardless of private use (not applicable on flat rate scheme....but to me the BIK is your challenge).

The BIK will hit you regardless of age of vehicle so if you can afford if you are as well to enjoy new vehicle.

At the end of the day you to go with your own judgment but if you were investigated by HMRC you would find them all over you if you claimed it was used only for business so it would be painful. If you do get hit for BIK you are looking at at c£250 per month if lower rate tax payer and £550+ of you are in the 40% tax band. Also your company would have to pay Class 1A NI which is c13.8% of cash BIK value (on a £50K Calif that would cost you something like £2.3K).

Have you thought of buying privately? Give yourself / partner a pay rise that would cover the HP cost. This way only one lot of money going out rather than finance and BIK.

I thought long and hard about this and spent weeks looking into it all and ended up working out best option was private purchase and claim as much from your business as you can.

Hope this helps a little.

 

[Darren cryne]

Hi

My accountant have very similar advice to that of Stephen. Re VAT if you are on the flat rate scheme you can claim back VAT if it is VAT qualifying vehicle (new of only owned by a VAT reg business) regardless of private use (not applicable on flat rate scheme....but to me the BIK is your challenge).

The BIK will hit you regardless of age of vehicle so if you can afford if you are as well to enjoy new vehicle.

At the end of the day you to go with your own judgment but if you were investigated by HMRC you would find them all over you if you claimed it was used only for business so it would be painful. If you do get hit for BIK you are looking at at c£250 per month if lower rate tax payer and £550+ of you are in the 40% tax band. Also your company would have to pay Class 1A NI which is c13.8% of cash BIK value (on a £50K Calif that would cost you something like £2.3K).

Have you thought of buying privately? Give yourself / partner a pay rise that would cover the HP cost. This way only one lot of money going out rather than finance and BIK.

I thought long and hard about this and spent weeks looking into it all and ended up working out best option was private purchase and claim as much from your business as you can.

Hope this helps a little.

 

[Darren cryne]

Hi. Any further info on this topic.
Who has claimed the vat back and what are people doing on the BIK Nd also class 1ni costs.

I've just got a T6 Cali and can't get a straight answer on vat and bik.

I own a convenience store and will be using it for cash and carry runs for small items etc.
But would use it a couple of times a year for camping.
anyone help
Thanks

 

[Kmann]

I do not know the rules in the UK, but I assume that if you get caught driving, and there is doubt about if its leisure over business you risk being charged the tax + penalty? I might be wrong. But that would be the case here in Denmark.

I use our Cali for both leisure and business. To overcome that risk, I bought the car as private, and get compensated for every km i drive in business purposes. Meaning the firm (my firm) pays me about 0,50 € pr. driven km taxfree. And I have an app + beacon automatically sorting the driving.

That is for me a hazzlefree and no risk solution. It might be a little more expensive, than a 100% business solution, but I am out of concern about the doubt-question.

Here there are many stories about owners of expensive cars that had to pay hundred og more thousand € penalty and tax because of a small trip to the baker.

 

[kave]

So its 5dkr for every km tax free?
In sweden it is 1.8skr per km tax free.

 

[Kmann]

So its 5dkr for every km tax free?
In sweden it is 1.8skr per km tax free.

No … 3,63 DKK up to 20.000 km. 1,99 DKK after that. I guess our compensation must be larger, as we pay 150% tax on cars, thats not the case en Sweden ;-)

 

[sdes]

Hi. Any further info on this topic.
Who has claimed the vat back and what are people doing on the BIK Nd also class 1ni costs.

I've just got a T6 Cali and can't get a straight answer on vat and bik.

I own a convenience store and will be using it for cash and carry runs for small items etc.
But would use it a couple of times a year for camping.
anyone help
Thanks

To the best of my understanding, any personal use rules it out for VAT I'm afraid, and I suspect the VAT man or woman would be somewhat sceptical that someone who pays over double what a VW "white van" would cost and buys a T6 Cali is going to limit their camping trips to a couple of times a year. If they did, they should probably sell it, buy the "white van" and have some nice holidays with the difference! ;-)

On my accountan's advice, I do put all the running costs of my 2007 Cali through the business and then pay a percentage back that represents the business / personal slpit. That does at least mean I can recalim the majority of the VAT on sercvicing, accessories etc.

I hope you enjoy the van anyhow - and use it more than you anticipate - it deserves it, and you probably need a few more breaks!

Stephen

 

[Spartan]

Actually, it depends (as has been mentioned before) on whether you're using the Flat Rate Scheme (FRS) for VAT accounting or not.

Under the FRS rules, you are perfectly entitled to reclaim 100% VAT (assuming the vehicle is VAT qualifying - caveat emptor!) even if you intend some private use - this is an exception from normal VAT accounting rules. The pertinent statement from HMRC is found in notice 733 (my bold underlining):

Paragraph 15.8: Apportionments for private use

‘To help simplify the flat rate scheme, where VAT on capital expenditure goods is reclaimable, the intended use of those items is treated as wholly for taxable supplies.

‘This means that you do not apportion input tax to cover any planned private or exempt use of the goods. This is different to the normal VAT rules.

‘Example:

• If employees are allowed free use of the company van at weekends to move goods; or
• a business video camera is used free by a friend of the proprietor to video a family wedding;

then there is no restriction of input tax or payment of output tax under the flat rate scheme.’​

That said, there is one very important exception to this: under FRS, you cannot reclaim any VAT if you intend (at any time) to use such 'capital expenditure goods' to generate income for your business e.g. by leasing, letting or hiring. This seems to be a very strange rule but, unfortunately, is confirmed by VAT Regulations SI 1995 No 2518, Reg 55A(1).

So if you used the Cali for business and even allowed substantial personal use, you are fine to reclaim all the VAT but you wouldn't also be able to use it for self-drive hire, for example.

There is a very nice article on FRS that covers most of these points I've just mentioned here:

http://www.taxation.co.uk/Articles/2012/03/28/287491/ten-out-ten

(if you have problems accessing the article directly, try Googling "reclaim vat flat rate scheme self-drive hire" and look for the link above in your search results - for some reason, that seems to give full access to the article).

 

[andyinluton]

Seek advice from a qualified accountant !

Further on in the article it mentions buying a car for the business, and a cali is regarded as a car for company car tax purposes, the car purchase is an exempt purchase so the VAT cannot be reclaimed but worse still if purchased via the company & the company is on the flat rate scheme you still have to pay the VAT on what you sell the car for. So you pay 20% Vat on purchase and 14% or so of the sale price, see the extract below:


John also bought a business car in January 2011 for £5,000 plus VAT – he did not claim input tax on the purchase because of the input tax block on cars available for private use.

John sold the car in March 2012 for £3,000 – he did not charge VAT on the sale (correctly).

However, the sale of goods on which input tax was blocked when purchased by a business represents an ‘exempt’ sale (VATA 1994, Sch 9 Gp 14).

Exempt sources of business income are included in the flat rate scheme calculations (excluding bank interest received), so John must pay VAT on the sale (March 2012 return): £3,000 multiplied by his flat-rate percentage.

Note: HMRC Notice 733, paragraph 15.9 confirms that: ‘if you have not claimed input tax on capital items, either by choice or because it was not allowed, you must include the sale of those items in your flat rate turnover’.

 

[andyinluton]

If HMRC regarded a cali as a van, we would all have them as company vans and pay the £1200 a year tax with the £239 fuel benefit and put all the costs of owning through the company.