Business purchase of new MH?

[LittleSkink]

I am part of a VAT registered Partnership business. There are only a handful of us and we work as consultants - so holidays can be at short notice / odd times of the year. We also occasionally have to work away for extended periods, often we can't bill accommodation to the client, so the hotel costs add up fast

 

We are thinking of buying a new MH for us to use. We have cash in the bank and it would be insured / maintained through the business which brings VAT benefits

 

Doing the sums the 5 year costs seem very little, I am wondering (i) anyone else done this, are there pit falls? (ii) have I missed a big cost somewhere?

 

£48k purchase price is £40k ex VAT - sale value after 5 years is maybe £35k (or better)

We don’t have to sell at 5 years but need a sensible time horizon to work to

Insurances / storage / servicing is c£2k per year

 

Split between us and that works out at a few hundred pounds each per year - that seems like a good investment

 

[Mickt]

I would have thought that the MH would have to have its value written down each year, then when its sold if more than the value tax will be paid on the profit

[colin]

AFAIK to claim back the VAT it must be for business use only and not used privately, so you can't use it for holidays. Also last time I worked away in a van, you couldn't claim back site fees. A chat with accountant and/or HMRC would seem in order.

[BruceM]

Not done it myself but re the numbers, as you’re a VAT registered business that's reclaimed the VAT on purchase, I think you’ll need to charge VAT when you resell after five years despite it being a second hand vehicle. It’s not clear from your numbers whether your resale value of at least £35K includes VAT or not. If it does include VAT, then I’d say that the resale value is conservatively realistic and implies a reduction in capital value of £12,000 (£40K-£28K). On the other hand, if you think that you’ll achieve a resale value after five years of £35K+VAT (£42,000) then I think that you’re being optimistic.

 

The other thing to take into account is the cost of camping up. If you can camp for free at the site you’ll be working then well and good. If you’ll need to use campsites then in the UK especially, that cost can vary considerably by season and location. Bear in mind that you’ll need access to power and toilet facilities if you’re staying on site for more than two or three days.

 

So using your more conservative numbers and assuming that you can camp for free then there’s an implied five year cost of £22,000 (12,000+(£2,000*5)) – ie £4,400 per year. Does that compare favourably to your Travelodge costs?

[Guest pelmetman]

colin - 2020-08-17 9:36 AM

 

AFAIK to claim back the VAT it must be for business use only and not used privately, so you can't use it for holidays. Also last time I worked away in a van, you couldn't claim back site fees. A chat with accountant and/or HMRC would seem in order.

 

I was able to claim the running costs for my camper for a few years, as we used it when we did showhouse work which often required overnight stays ;-) ...........

 

 

[LittleSkink]

thanks folks, really helpful

 

It does look like the HMRC will view a MH in similar ways to a company car (it even states in some of their tax guidance that MH would be considered a car for tax purposes, not a plant/machinery asset) - so the hole in my businiess case are the additional taxes and Benefit in Kind costs, though Partners in LLPs are treated differntly to employees

 

Going to have a chat with our accountant

 

FWIW I would rather live/work in a decent MH for a few weeks at a time than any Travelodge

[colin]

LittleSkink - 2020-08-17 10:25 AM

 

FWIW I would rather live/work in a decent MH for a few weeks at a time than any Travelodge

 

I spent a year living weekdays in a damn sight better hotels than Travelodge, but that was enough for me, I went on to living weekdays in a touring caravan, and was much happier.

[Den]

We claimed VAT back on our Motorhome for the reason of working away for several days at a time.

It was never questioned and all pretty well above board.

Company paid all tax. Insurance and running costs.

Come the time of sale it was PX’d and of course the price can be adjusted for financial reason.

This enabled us to go for very decent Motorhomes.

 

Den

[flicka]

It would be advisable to talk to insurance companies, regarding "business" use, as that would have a big impact on premiums.

I also think, that you estimated return after 5years @ £35k is based on dealer forecourt prices, rather than what they actually sell for. & selling privately would return a lower figure than forecourt prices.

[Den]

Quite a few people use companies to purchase Motorhomes.

They don’t actually use them Buissness wise.

 

[curdle]

When you reclaim the VAT you have to decide what proportion of personal use the MH will be versus business use and then claim only the Vat percentage for business use. Any personal use will have to be declared during self assessment. Insurance will be your next headache because the huge majority of insurers will not quote on business use. To illustrate this I pay less than 300.00 p.a on my personal MH but even with a few years no-claim bonus, the premium for a company MH for business use capped at 4000 miles pa is 1360.00 p.a. It took a lot of effort by my broker to place the insurance.

[curdle]

"Quite a few people use companies to purchase Motorhomes.

They don’t actually use them Business wise."

 

If they do as you suggest, they run several risks. When my company purchased a MH it triggered an immediate VAT inspection because of the VAT claim. In those circumstances they want to know precisely what the vehicle will be used for. If the vehicle is business registered than it must be covered by a business insurance which is expensive and not so easy to obtain. Anyone running a business vehicle on a private insurance runs the risk of the insurance company not paying out and an added risk that HMRC would also question the insurance arrangements and actual use of the vehicle, if it came to light.