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VAT in Up-front payment of Finance lease

  • 26-10-2017 2:56pm
    #1
    exaisle
    Registered Users, Registered Users 2 Posts: 2,675 ✭✭✭


    One for the professionals here...once and for all can somebody clarify if VAT is reclaimable on advance payments/deposit as part of a finance lease in the period in which it's paid, or does it have to be claimed over the period of the lease?

    I'm aware that the up-front payment has to be apportioned over the term of the lease for Income Tax/Corporation Tax purposes.

    Example:
    Mr X acquires a commercial vehicle costing €40,000 (ex VAT) through a finance lease over 36 months. He pays €12,300 (ie. €10,000 + VAT) up front. Can the €2,300 (VAT element of the up-front payment) be reclaimed in month 1 or does he have to claim €63.88 each month for the 36 months?


Comments

  • #2
    gerrybbadd
    Registered Users, Registered Users 2 Posts: 10,301 ✭✭✭✭gerrybbadd


    exaisle wrote: »
    One for the professionals here...once and for all can somebody clarify if VAT is reclaimable on advance payments/deposit as part of a finance lease in the period in which it's paid, or does it have to be claimed over the period of the lease?

    I'm aware that the up-front payment has to be apportioned over the term of the lease for Income Tax/Corporation Tax purposes.

    Example:
    Mr X acquires a commercial vehicle costing €40,000 (ex VAT) through a finance lease over 36 months. He pays €12,300 (ie. €10,000 + VAT) up front. Can the €2,300 (VAT element of the up-front payment) be reclaimed in month 1 or does he have to claim €63.88 each month for the 36 months?

    Is this Hire Purchase?

    If so, you can claim it all in one go.

    If it's a lease where the item isn't owned by the company or you in the end, then you claim the VAT back per period


  • #3
    nompere
    Registered Users, Registered Users 2 Posts: 1,678 ✭✭✭nompere


    If you buy a vehicle for cash, you get your capital allowances over 8 years. That doesn't make any difference to the VAT recovery. You claim it at the time you buy.

    So it's the same with lease payments.

    If you are entitled to VAT recovery, and you have a VAT invoice, then you put the VAT on your VAT return.

    The lease provisions whereby you spread the advance lease payments over the life of the lease were introduced to mirror the capital allowances rules, in order to prevent people getting a large deduction in year 1.


  • #4
    exaisle
    Registered Users, Registered Users 2 Posts: 2,675 ✭✭✭exaisle


    gerrybbadd wrote: »
    Is this Hire Purchase?

    If so, you can claim it all in one go.

    If it's a lease where the item isn't owned by the company or you in the end, then you claim the VAT back per period

    It's a finance lease...not Hire Purchase. I'm only concerned with the VAT element of the up-front payment (ie "deposit").


  • #5
    tanit
    Registered Users, Registered Users 2 Posts: 325 ✭✭tanit


    exaisle wrote: »
    It's a finance lease...not Hire Purchase. I'm only concerned with the VAT element of the up-front payment (ie "deposit").
    So long as your client is Vat registered you can claim it in full in the period it occurs and you tick the box of being an exceptional item to inform Revenue that there are one off items affecting the return one way or another. In your case either causing a very low liability or a refund. Revenue may want to contact you regarding the exceptional items. They usually ask for copies of invoices or agreement for the exceptional item and may request a listing or detailed vat return to be sent to them with all the items for the return. If they ask for the detailed return the may request copies of additional invoices and they can go picky with details regarding the name of the customer in the invoice.

    I know the last part is completely unrelated to the finance lease and the deposit but it's what happened to us in the office in a very similar situation to yours regarding a finance lease with a big deposit upfront causing a refund. They came back looking for more and were incredibly touchy about the rest of the invoices even though everything was proper regarding the return and the invoices. They were a couple of very small invoices we had to take out but that was it (it was sole trader becoming a company and a couple of them still had the sole trader details and not the company, they were otherwise perfectly legit). But all this took place via MyEnquiries and there were no other issues after.

    So expect some kind of enquiry and keep everything on hand to answer them promptly. Its what they like.

    IHTH


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