Conference terri::cars_uk

    Will I be better off with the following scenario :-
    
    	o My car spends most of it's time in the garage not working
    
    	o I hardly use motorways - I hate the things.
    
    Will I be better off?!?!

    From the treasury docs...
    
    
//    5.33 From 1 August 1995 businesses will be able to recover VAT on the
//    purchase of cars bought wholly for business use, primarily leasing.
//    Where VAT is recoverable, businesses will have to account for output
//    tax on the eventual sale of the car by the business. Only half of the
//    VAT applying to leasing charges will be recoverable where there is any
//    private use (24).
    
    Now, my (potentially flawed) understanding of this is:
    
    The finance company pays less for the car but must account for VAT when
    selling the vehicle on. So, the residual is reduced.
    
    The renting company will pay less per month because the initial cost is
    lower but more per month because the residual is lower and more per
    month because they can only claim back _half_ of the VAT.
    
    Swings and roundabouts?
    
    John O'C

    
�//    5.33 From 1 August 1995 businesses will be able to recover VAT on the
�//    purchase of cars bought wholly for business use, primarily leasing.
                               ^^^^^^^^^^^^^^^^^^^^^^^^
        
        My (potentially flawed) understanding is that it won't make
        any difference at all to us - our lease cars are available 
        for personal use.
        
        Ian.

//                                                         Only half of the
//    VAT applying to leasing charges will be recoverable where there is any
//    private use (24).
    
    It sounds like this bit might affect me.
    
    tmp

        Sorry - you're right,  I didn't take in the whole thing before
        replying.
        
        So the lease company claims back all VAT if no personal use,
        half VAT if personal use, and pays VAT on the sale price?
        
        In that case I predict that lease prices will go up to cover the 
        increased cost of administration.
        
        Ian.

I guess that whatever the "fine print" says, we won't get any benefit
from the changes (more undercompensated?).

And while we are on the subject of the budget, the price of a gallon
of go-juice must be getting awfully close to the "review the milage
rate" cutoff point.

mb

    
    Was there anything in the budget about having to tax a car to own it?
    
    There's been a lot of talk in the classic car press recently about
    a proposal to force owners of cars to tax them all the time, which is
    not popular with classic car owners who may be restoring or laying
    their cars up over the winter months.
    
    Mark

//        So the lease company claims back all VAT if no personal use,
//        half VAT if personal use, and pays VAT on the sale price?
    
    No, there is still a lot of confusion here but the situation appears to
    be as follows:
    
    Company A buys a car and leases it for 3 years to company B who provide
    it to an employee who is allowed to use it privately as well as on
    business.
    
    Suppose that the car costs 16K exclusinve of tax.
    
    Under the old rules:
    
    Company A buys the car, shelling out 18.8K in cash. 2.8K of which is
    paid to the tax man.
    
    They need to receive (say) 400 per month and 9.4K after 3 years to
    cover their costs. So they charge company B 470 per month (inc VAT)
    Co A pay the tax man 70/month and company B reclaims 70/month from the
    tax man. Net cost to Co B 400/month
    
    After 3 years, Co B gives the car back to Co A who then sell it for
    9.4K. All square.
    
    Under the new rules:
    
    Company A buys the car shelling out 18.8K case but then reclaiming 2.8K
    cash from the tax man. So, they now only need 340/month and 8K after 3
    years. They can reclaim the VAT as they have bought the vehicle solely
    for business purposes, their business is leasing cars out.
    
    They lease the car to company B who pay 340/month plus VAT (total
    400/month.) Because company B allow private use, they can only claim
    half the VAT back so they pay a net 370/month.
    
    After 3 years, the car goes back and is sold for 9.4K but 1.4K must be
    given to the VAT man leaving 8K to pay off the residual.
    
    That, I am sure, is what the clause says. The intention appears to be
    to exempt from VAT, the business use aspect of the car.
    
    John O'C

>>>And while we are on the subject of the budget, the price of a gallon
>>>of go-juice must be getting awfully close to the "review the milage
>>>rate" cutoff point.


	You must remember that we all have to subsidise the comany and its
expenses these days - look at the way the Opted out of the Car Scheme rates went
down last year - the cost of buying and running a car didn't go down!!!!

			Malcolm - not very tongue-in-cheek!

	There was some reference in the Budget re. collection of
	excise duty and a discussion document to be published 
	(by the end of the year?). This will probably amount to
	the old chestnut of having to tax a vehicle even if it's 
	not being used. Perhaps though there will be exceptions.

	-John

    For my sins, I have a Frontararrh! I get 6 mls to the ltr, and @ 8p/ml
    it takes no gene to work out that I am now fully supporting DEC.
    I cant now afford to pay to have it cleaned, top up the oil or any of
    the other things the milage rate is/was supposed to cover.!!!

pay to have it cleaned????