selling aircraft: VAT question

[scooter boy]

I have just agreed a fair price for the sale of a UK (non-VAT paid) aircraft with a buyer from within the EU.:ok:

My VAT registered partnership will be selling the aircraft to a VAT registered company within the EU.

I need to provide this person with an invoice but do I add UK VAT at 15% if the aircraft is being exported? AFAIK I don't think I do.:confused:

If the sale is zero rated for VAT then the buyer will presumably need to pay VAT in their home country? This would presumably be reclaimable and passable on to the next buyer if the aircraft was owned by a VAT registered company?

I'm a little confused.com

SB

PS I know about the Danish route - the buyer doesn't want to use them.

[Fuji Abound]

The obvious question is how did the aircraft originally come to be non VAT paid in the UK? Do you mean your partnership reclaimed the VAT on purchase?

In the event doubtless you will want to ensure you deal with the transaction correctly. I would have thought the person to ask is the partnership's accountant who will be able to give you a clear and definitive answer based on proper knowledge of all the facts that may be relevant.

[Whirlygig]

The normal rule for the export of goods within the EU is that the goods will be zero-rated if selling to another EU VAT registered business. You need to quote their VAT number on the invoice and other export documents and you will need to complete an Intrastat form along with your VAT return.

From what you've said, I cannot see why your transaction would not fall under these rules but I would check with the HMRC helpline (no need to incur accountant's fees); they are normally very helpful.

Cheers

Whirls

[Jofm5]

I concur with Whirlygig

For example I have sold the services of my UK based VAT registered company to a German based VAT equivalent registered company. So long as your invoice clearly displays both yours and theirs VAT registration numbers then no VAT is payable.

I am unsure about the Intrastat that Whirlygig mentions (I never had to do this but this was 1999-2000 weekly for 9 months) but you will have to declare the sales in the correct manner on the VAT return as sales to the EU on your VAT return.

[gyrotyro]

If the a/c is owned by a VAT registered company then you do not charge VAT to an EU registered company. You do need their VAT number though and the sale gets included in the lower part of the VAT return.

They will pay the appropriate rate of VAT for their country when they come to sell the a/c in turn.

If the a/c is a non VAT one and you are selling it as a private individual then you do not charge VAT.

If you did not claim VAT when you bought it then it remains a non VAT machine. IE it will still be VAT paid for tax purposes if sold to a private individual.

[Whirlygig]

Slightly off-track but to clarify things for jofm5:-

Intrastat forms are completed (along with the EC Sales List) for goods exported to another EU country. If you were selling services, then you would have had no need for those forms. The Intrastat form will show a code for the type of goods exported and there is a humungous manual which lists all the codes.

If a UK VAT registered business undertakes a service in this country, then VAT should be charged; it matters not where the customer is based or whether they are VAT registered.

If a UK VAT registered business undertakes a service in another EU country, then the VAT rules of that country are applicable. So, if you go to Germany and your business undertakes a service for a German MWST registered business, there is no VAT chargeable provided you fall below the German turnover limits for registration. As soon as your turnover goes above that limit, you must register for MWST (German VAT).

Cheers

Whirls

[IO540]

Presumably the plane was purchased in the UK, by a VAT registered UK company, and this company (which claimed the VAT back) has always owned it.

That is why it is being offered for sale as "not VAT paid" i.e. the price must be quoted "plus VAT".

In this case, a UK buyer must be charged VAT at 15%. (If he is a VAT registered body then he will claim it back but that is not for you to worry about).

An EU buyer must be charged VAT at 15% too, unless he provides you with a valid VAT number in which case you don't charge him VAT. But make sure this VAT number is valid before proceeding - this is a common scam which obviously saves the (non VAT reg'd) scammer 15%. In my business, we have been caught a number of times by people giving us duff VAT numbers, getting the goods VAT-free, and then some weeks or months after our EC Sales List for that quarter has been submitted, C&E sent it back with some invalid numbers marked. And, gosh, what a suprise, the customer (who was a one-off) no longer replies to emails because he knows we will be after him for another 15%. In this case, we have to pay the VAT to C&E because we are deemed to have sold the goods "plus VAT". All such transactions have to date been trivial (say £50) but if you got one for say £200k then you will lose £26086 (the £200k will be deemed to have included VAT at 15%) and the buyer will be long gone, with a smile.

I think a lot of these people have given us a duff VAT # accidentally but even those don't have a great incentive to correct it afterwards.

I hope I got the above right, but it's a block I've been around a few times :)

C&E has a website on which you can validate EU VAT numbers.

A private individual can be VAT registered (no need to be a "company") but this is less usual. In any case, check that he is not using the VAT # of some other company or entity, not necessarily related to him (another scam ;) ). Check the VAT # actually belongs to the buyer of the plane.

[Fuji Abound]

(no need to incur accountant's fees);

True, you could follow the advice on here, and get it wrong. You could follow the advice given to you by HMRC and also get it wrong because you overlooked to explain a vital element of the transaction. If you cant afford your accontant's fees so be it, but given you were referring to a business, and a business which I guess almost certainly will have an accountant, I will stay with my original advice. It is a very simple issue but as Whirls demonstrates it is also very easy to get confused over when and whether an Intrastat return is necessary. Moreover you increase your exposure to an audit significantly the moment you make an Intrastat return for the first time, and then who are you going to ask how to complete the return? PPRuNe is great, but sometimes it is worth getting good professional advice - but of course it is up to you.

I will however give you one peice of general advice. If you resort to relying on the advice of HMRC make sure you make a note of the reference number they give you, and call back after to make sure their case notes agree with yours. :)

[Whirlygig]

..or you could ask an accountant who has no idea and gets it wrong as well :} There are some on here who have sought professional advice from members of the same august body to which I belong and were given duff advice, costing them in the long run.

Cheers

Whirls

[mm_flynn]

..or you could ask an accountant who has no idea and gets it wrong as well :}
I would always strongly advise the use of a professional adviser (and never trust the ramblings on a forum), that way if it goes wrong and HMR&C decides to treat you as a criminal you at least have the defense of having taken professional advice, and you can sue your advisor, so they are more interested in helping you fight your corner.

[Jofm5]

Whirlygig - thanks for the heads up on the Transact form, as a software developer that is probably why my accountant never mentioned it to me as it was only my service being sold.

[Whirlygig]

Gee, thanks for the vote of confidence :} some of us are professional accountants and I know how little the average accountant know about certain areas of VAT and taxation. If an accountant doesn't know the answer, where do you think they go?

Personally, I have a lot of time for the HMRC helpline and have had specialists come back to me with written rulings.

Jofm5 - my pleasure :ok:

Cheers

Whirls

[Fuji Abound]

If an accountant doesn't know the answer, where do you think they go?


I see, so we should stop going to see our doctor and ring NHS direct instead. :)

The point of going to any general practioner, be he a GP, accountant or solicitor, is he should know where to go to obtain the correct advice and, more importantly, how to ensure he has captured all the relevant facts and is able to interpret the advice given correctly. Any accountant who is regularly going to HMRC as their sole provider of technical advice is in any event best avoided. There are so many better ways of obtaining a second opinion which are far more likely to reveal alternatives ways of structuring the transaction to the benefit of your client.

Clearly, as with any professional, we will all be able to cite occasions when the advice was poor, but I doubt that is good enough reason to do away with doctors, any more than accountants or solicitors. Moreover, the comfort of susbstantial PI cover provides more than a modicum of reassurance.

You need to understand HMRC are under no obligation to suggest the best way of arranging your affairs to mitigate your liability. You also need to understand that they can only deal with the facts as presented. Rather like a medical diagnosis it is all to easy for people to think they have all sorts of horrific aliments if you give them a medical dictionary and leave them to their own devices. In short, an accountant should be able to ensure he asks the correct questions and gives the correct advice.

I know of a number of cases where people have 'phoned HMRC, acted on their advice, and come horribly unstuck. Of course the advice was correct as far as it went, the issue was the questioner only gave half the story.

You kind of end up thinking there is a reason most solicitors, accountants, etc., include the imortal words on their newsletter that the advice set out in this article covers the matter in general terms but you should ALWAYS take specific advice to your circumstances. Perhaps none of them actually know what they are doing and include disclaimers of this sort for the hell of it. :)

Please dont misunderstand me. I agree accountants make mistakes, in much the same way HMRC are quite capable of making mistakes. I also dont have any issue with the question being asked on here and people giving their views. Moreover, in this case, the question may not be all that complicated. I am simply making the point that if a substantial sum of money is potentially involved, and the poster already has an accountant, which one would expect to be the case, personally I find it extraordinary that you would pay someone to look after your affairs and yet expect them to do so knowing only half the story.

In short I think you are being rather naive, Whirlygig, but then again I recall a similiar discussion about the definition of insolvency. :)

[Whirlygig]

I'm not naive at all and I am highly flattered that you think me and my ilk are such worthy folks!

I'd be interested to know Fuji, what your professional qualifications are in the realm of accountancy, finance and taxation? But then, I suspect, you'd argue against anything I said.

It's not a black art and, as I said originally, from what the OP said, the circumstances appear to be straightforward.

Cheers

Whirls

[Fuji Abound]

It's not a black art and, as I said originally, from what the OP said, the circumstances appear to be straightforward.



That is what really worries me. :)

Anyway, I didnt mean to be rude, please forgive me, clearly I simply see things rather differently from you; we shall have to agree to disagree on this one. For the same reason I have tried to explain the elements of your post with which I disagree and why, I dont have any issues what so ever with you, I will disagree with anyone if it is a topic I feel strongly about and believe their views to be at variance with my own.

I am as cynical as the next, but I do feel there is an increasing tendency (and I am not criticisng the original poster) for folk to dismiss professional advice. Of course their are some bad eggs, and of course we all make mistakes, but it seems rather disparaging to expect professionals to train for the years they do (not just learning the subject matter, but, as importantly, learning how to deal with matters in which they are not specialists) and yet give the perception laymen would do just as well 'phoning up HMRC or posting the question on some radom internet forum, in this case with the only connection being an aircraft, whereas the subject of the debate is tax.

[Whirlygig]

Why thank you Fuji; I did train for a further four years after a degree in order to become a Chartered Accountant. I do not disparage my own profession but neither do I believe we should be held up on pedestals as being the fonts of all knowledge when so much of it is straightforward. If I can save someone some costly fees, why not?

I was once told that I should never give advice for free as no-one would value it. If I charge £200 an hour, then that advice is valuable. Perhaps I should have listened to that advice.

Cheers

Whirls

[Fuji Abound]

all knowledge when so much of it is straightforward.


Final point of debate from me, I promise. :)

When you fly with someone less experienced or who is learning to fly you often cannot understand why they find it so difficult?

When they are on final and you ask them what the wind is doing you cant understand why they are so focused on the landing they never had time to watch the sock.

Often things are only straightforward because you are dealing with them all the time. You know what to ask and when to ask. You also know when to shut up!

I have no idea how long you have been in the profession but it is interesting how many old timers never cease to be fascinated by the apparent ingenuity with which clients, patients and students manage to come up with ways of making things we think simple, complicated. Worth thinking about! :)

I was once told that I should never give advice for free as no-one would value it. If I charge £200 an hour, then that advice is valuable. Perhaps I should have listened to that advice.

You do seem to have been given some duff advice! :) I can now better understand your views (only joking).

As I said earlier I was simply making the point that giving out advice without having all the facts can cause more problems than it solves. If you think HMRC will illicit all the facts, give the best advice (rather different from giving advice) and that all the facts can be illicited on an internet forum then by all means dont charge - in fact that is probably wise, because at least on an anoymous forum its going to be very difficult for any one to sue you if you get it wrong. :) :)

To sum up the only point I suppose I am trying to make is I think by all means we should give out all the advice we like, but whether it relates to pilot training, tax or whatever, I also think it is worth making the point if in doubt ask your instructor, accountant etc., Indeed I think that is always the unwritten caveat on here; the reason I commented is you appear to take the opposite view, and suggest their may be no good reason to ask your professional advisor at all - as I said earlier I disagree with that opinion.

[IO540]

To add to my last post: there are reportedly some very clever "aircraft buyer" scammers around, even going as far as using a bogus escrow company.

[Fuji Abound]

IO540

To add to my last post: there are reportedly some very clever "aircraft buyer" scammers around, even going as far as using a bogus escrow company.


Indeed, maybe Scooter Boy needs both a good lawyer and accountant then. :) Be a shame to have to hand over VAT you had expected to, and also find yourself without an aircraft. :) :)

[helicopter-redeye]

The word I saw was 'partnership' which I think is under different law to a limited company? (Partnership Act -v- Companies Act). Would this make a difference?






SB M or 44?

[scooter boy]

Redeye it was the R44.

Whirlygig has it spot on, this is what my accountant confirmed.

The Partnership is VAT registered, VAT was reclaimed on both the aircraft it owns and needs to be "handed on" to the next purchaser.

My question really related to the mechanism for doing this outside the UK but within the EU.

The aircraft will be going to a VAT registered EU company, the purchaser has already invited me to check his VAT registration details and has also been down this route before.

I have not been down this route, hence the question.

Why am I selling? I need to put the money elsewhere into this project:

www.woodestate.co.uk (http://www.woodestate.co.uk)

(Wood Estate has a helicopter landing site of course!)

I can drive for a while until my helicopter fund is healthy again!

It will make me appreciate the freedom afforded by the chopper even more.

Thanks for all your input,

SB

[Whirlygig]

The word I saw was 'partnership' which I think is under different law to a limited company? (Partnership Act -v- Companies Act). Would this make a difference?Nope. Well, not as far as VAT is concerned anyway.

Hey SB, can fellow Rotorheads drop in a for a cuppa?

Cheers

Whirls

[Fuji Abound]

this is what my accountant confirmed.

Well I am glad you have restored ours and hopefully Whirls faith. :ok:

Good luck with your deal and also the resort which looks superb. You just need a 750M+ strip for the rest of us. :)