£2k flat rate vat rule

[d000hg]

Pretty sure I've had official advice you can. The example I was given was PC+printer. PC + a load of software I don't know, but for instance a PC can have 3 monitors and those are definitely part of the PC despite being sold as extra items.... often you buy PC, monitors and peripherals separately

[malvolio]

OK, that's not my understanding, I've always been told it is a discrete purchase of a single item. The rules may have changed, of course, I will have a deeper look.

[TykeMerc]

According to HMRC:

•It must be a single purchase of capital goods with a VAT-inclusive price of £2,000 or more. That doesn't mean you are restricted to claiming back the VAT on a single item - for example, you could buy a pizza oven, fridge and dishwasher, as long as you buy them at the same time from the same supplier and the price is more than £2,000 including VAT.

•You can't claim back VAT on goods that you intend to use up (consume) within a year.

HM Revenue & Customs: Flat Rate Scheme for VAT

In my view that means you can buy a package deal that includes various items, but you cannot just buy a lot of little things that would usually be consumables (and written off to the P&L) just to make it £2,000.

Fair enough I'm glad my understanding was off, that's good to know.

[matzie]

I think I might have some bad news.

HM Revenue & Customs: Flat Rate Scheme for VAT says, as we've already established:

"These are the rules for claiming back VAT when you buy capital assets:
It must be a single purchase of capital goods with a VAT-inclusive price of £2,000 or more. That doesn't mean you are restricted to claiming back the VAT on a single item - for example, you could buy a pizza oven, fridge and dishwasher, as long as you buy them at the same time from the same supplier and the price is more than £2,000 including VAT."

So the "pizza oven, fridge and dishwasher" example, three discrete items together required for the business purpose of operating a commercial kitchen, count as a single capital purchase.

Many of us will have inferred from this that a purchase of multiple discrete items of computer hardware in the same purchase, exceeding £2k, also counts as a single capital purchase. I believe this is a fully logical conclusion to draw from that example.

BUT

That page is a summary of the scheme. Advice note VAT 733 is the detail.

Funnily enough, there's an extra clarification in there which is different to the summarised version:

15.3 What counts as a single purchase of capital goods?

Examples of a single purchase are:

A computer package (computer, printer, camera, scanner, speakers etc.) bought as one package is one purchase of capital expenditure goods. If the package costs £2,000 or more (incl. VAT) then input tax can be claimed.
Items of kitchen equipment (a pizza oven, a fridge and a dishwasher) bought for a restaurant. If all the items are from one supplier at one time, then they count as one purchase of capital expenditure goods.

...

This extra detail makes it pretty clear to me that if you buy three laptops at £700 each, even though you've gone over £2000, it's not a single purchase. It would be very interesting to debate whether a successful takeaway business that bought three pizza ovens at that price would be able to claim!

I don't know if there's any case law on this, but as far as I can see, with this information, many of us will have made purchasing decisions thinking the full VAT would be reclaimable but that no longer looks correct.

In my case, I bought an iMac for £1700 and two iPads, with the intention of enabling iOS development for iPad; I thought the entire amount would be claimable as a single purchase. My feeling is that just as (pizza oven+fridge+dishwasher) confers one business use (operating takeaway), I can reasonably claim (iMac plus one iPad) as a single purchase (conferring the business use of being able to develop for an iPad), but not reclaim the VAT on the other iPad. However, it's reasonable to test on two different iPads, so perhaps my logic is sound for the entire purchase...

What do you think?

[Fred Bloggs]

Yet another very fine illustration of why the UK taxation system is simply not fit for purpose any more. Such a simple question, yet not a single simple answer. How on earth any of us are supposed to be confident of being 100% tax compliant is a complete mystery to me lately.

[malvolio]

Actually, thinking about it, it does align to my understanding. A built PC package as a single purchase to meet a particular need (even if only to run the business on it) is OK, three smaller ones, or a single order for a bunch of otherwise unrelated items won't be. But as usual with NL-inspired HMRC matters, it is totally opaque and would need a court case to answer the question finally.

[SueEllen]

Yet another very fine illustration of why the UK taxation system is simply not fit for purpose any more. Such a simple question, yet not a single simple answer. How on earth any of us are supposed to be confident of being 100% tax compliant is a complete mystery to me lately.

You can't be 100% tax compliant.

That way HMRC can threaten you with a fine and if you don't know the right accountants/tax lawyers you will be scared enough to pay up.

I mean they have screwed up the PAYE system for people who only get paid via an employer, so there is no hope for small businesses and the self-employed.

[DaveB]

I think the key phrase here is "Single purchase". If everything is ordered on one invoice and paid as a single payment then it counts. What you can't do is buy three different items from the same supplier on three different invoices and aggregate them for VAT purposes.

[matzie]

I think the key phrase here is "Single purchase".

I'm currently trawling Bailii for VAT tribunal decisions and so far the first vaguely relevant one I've found is Eventful Management Ltd vs HMRC. The appellant there clearly had no case IMHO but in the conclusions the issue of a singular purchase is emphasised:

"The Regulation quite clearly refers to "a relevant purchase". The purchase is in the singular, although we accept that goods are in the plural and there can be occasions when there is a single purchase of a number of goods. "

edit: This is the list I'm reviewing: http://www.bailii.org/cgi-bin/sino_s...Fcases%2FUKVAT - I've gone through the first page of results and this seems to be the only relevant case; will pick up more later.

[Fred Bloggs]

You can't be 100% tax compliant.

That way HMRC can threaten you with a fine and if you don't know the right accountants/tax lawyers you will be scared enough to pay up.

I mean they have screwed up the PAYE system for people who only get paid via an employer, so there is no hope for small businesses and the self-employed.

It's my duty to strive for 100% tax compliance and I aim to be so. However, I do agree with your sentiment. It just shows how far down the road of economic destruction the UK has travelled since 1997 when NL set about their demolition job in the name of "fairness". I fear the situation is permanent and irreversible.