Can you reclaim the VAT and/or tax on training costs?

[rotormad]

Ok can some PLEASE point me in the right direction..even close to it would be good...

I have started my ATPL studies and my commercial course and have been told by various flying school that if i go 'self employed' i can claim vat/tax back. When i have pushed these 'flying schools' for further info and advice they become rather tight lipped!!

Can someone pleae elaborate on this issue, i would really appreciate it, if i can save myslef a bit of cash...........i would be very grateful.

Ohh i have tried two acountants already, neither could help me!!


Cheers

rotomad

[headsethair]

0845 010 9000 - the National Advice line for VAT or see the website at www.hmce.gov.uk.

VAT has no simple rules.

[Whirlybird]

rotormad,

It really is quite simple. You set up a business as a self-employed helicopter pilot. Since you are a Sole Trader, all this involves is filling in a form telling the VAT people that this is what you are. You are then allowed to claim back VAT on your training costs. If it's your only business (I was self-employed in another capacity anyway, so it didn't quite apply) you MAY be asked for a simple business plan, ie what you're doing and when you might finish training etc - I've heard of this happening to one person. You then keep all your receipts, and claim back the VAT on a simple form every three months. Easy-peasy, and quite legal. I was told the same thing by flying schools, but my accountant asked me to check with the VAT help line. I did, emphasising that I wouldn't be earning for quite a while; they said it was legal, and even gave me the rules and time limits for claiming back VAT already paid (3 years for products, 6 months for services I think - ask them). My accountant still wouldn't believe it, and I nearly changed accountants, but the next time I went to see him he seemed quite happy, so I guess he'd checked it himself. He set it all up for me, but I do it myself now, as it really is very easy.

I believe you live quite close to me. My accountant is in Oswestry, Shropshire, and has been through all this with me already, so he knows about it. If this is convenient for you, and you'd like his phone number, send me a PM or email, and I'll get back to you as soon as I can, which may not be till next weekend as I'm off down to Thruxton again this afternoon.

Good Luck!

[rotormad]

Thanks for the info, however the only snag was that i was under the impression that you could only claim VAT back to the amount that you have invoiced for (within a business setting)...i obviously must be wrong...onto the accountants>...

Cheers all the same

Rotormad

[Draco]

"i was under the impression that you could only claim VAT back to the amount that you have invoiced for ....."

Not so. if you have more inputs than outputs, HMC&E can send the difference back to you by BACS (ie immediate bank transfer) on the due date. I had this when i set up a business in a different sphere and had up-front costs to reclaim.

The next issue to face is whether the people you will eventually work for don't mind paying VAT on your services. If you remain self employed, there's also the small issue of IR35, but let's not go there on a sunday evening.

Time limits are also not helpful.... depending where you are on the training.

[What Limits]

But IR35 is quite straightforward - you can not be self-employed and work for the same organisation all the time. You just need to show invoices to more than one company to get round it.

Uh oh, head above parapet again!

[Huwey]

As part of my route to becoming a QHI I did the business plan thing which with the VAT rules at the time meant being able to reclaim VAT on training including PPL and hour building plus AFI course.

The pre-trading claim period was six months then (1998) I had to be careful when I registered for VAT. It helped with "business" cash flow and reduced the amount required to be borrowed. However....the point is I had to convince HMC that I would be self-employed and that I would be in the position of repaying it in the future. I went in person with my plan....over the phone
exaplanations don't always do you justice particularly when saying I want to a ATPL.

If you subsequently found yourself working for a North Sea operator for example in a salaried position they would ask for the VAT and possibly interest on the reclamed VAT in full. They periodically checked with me to find out when I would commence trading and paying them VAT!

IR 35 has not (touch wood) affected the self employed instrutor/pilot community to my knowledge yet. We are simply sole traders. VAT is obviously now charged and added to my monthly invoice which in turn HMC get returned to them every quarter. Ideally you have an accountant to help make tax affairs run smoothly and you never ever fail to pay the VAT on time.

Hope some of this may help!

[ClearBlueWater]

Rotormad, as you can see from the above posts different people have different experiences with what should be a straight forward process.

I know some people who simply filled in a VAT form, became immediately registered and were given back the VAT charged on their costs in becoming a self employed instructor. Others (me!) had to complete business plans. On completion of a business plan I was asked to supply further evidence of intention to trade (?) including letters from potential future employers i.e. FTOs, guaranteeing that they would take me on as an instructor once qualified. Pray tell how one is supposed to arrange this?

After three years of occasional correspondence and several phone calls between me and HMC&E I was suddenly informed that I would be registered and that I could claim back to the date of my initial application three years previously.

It is legal, it's perfectly usual and all the comments in the previous posts are true too.

[rotormad]

So fairly straight forward then

[What Limits]

As with all Government departments tasked to screw money out of unsuspecting people (HMCE, IR, CAA etc) there are no quick and easy answers.

[md 600 driver]

i might also mention that if any moneys are paid into this buisness [for services rendered ] you will have to charge vat on them
but the best bit is they are income and as most of your funds are outgoings you will get these ammounts tax free up to the ammount you pay for training this can save you 25 to 40% plus ni contibutions

[Vfrpilotpb]

Rotormad,

I am self employed and run my own company, as a sole trader I am allowed to reclaim any input tax levied against me in the form of bills(invoices) and or services, I can also claim for the normal vat on every day things like fuel, stationary, transport, computers, programmes and a host of other expensive items that attract VAT, however the downside is that you are open to examination at the drop of a hat (so to speak) and if you are found to have reclaimed wrongly or worse still purposely you will suffer from a severe reprimand to your wallet, most HMCE employees have no world experience and are guided blindly by their rule book, they see Black and white only NEVER any shaded areas, so enter at your peril, however the upside is that you will be allowed to reclaim all training and hours building Vat plus books and exams and GFT's, that makes the training much easier on your pocket, and if you really are serious about becoming a CPL then if you have your own business its no problem, however if you work for only one company you may find the eyes of the Irs are upon you and you would be hard pressed to convince them you were really self employed, and to boot THEY HAVE NO HUMOUR in their pea sized brains at all.

[ClearBlueWater]

Vfrpilotpb, can you clarify your comment re claiming back costs incurred on ... books and exams and GFT's... I don't think these attract VAT and are therefore outside the scope of any possible reclaim? If not I've just done myself out of a fair few quid!

[Go-Around]

What would happen if you got through the CPL and FIC claiming the VAT back and then were offered a full time job with one school or operator. Or didn't work for ages?

[rotormad]

Thanks all

I can see a problem area arising. I am, as you know, studing for my ATPL's but i am still working as a consultant once or twice a week for the SAME company and i know you cant do this...so i think i could be up s**t creek without a paddle....

Also, what if you can't earn as a pilot but have a source of income that is not linked with the aviation industry in anyway, where do you stand there...any ideas??

My heads spinning

Rotormad

[Ludwig]

'scuse me butting in here but this all seems to god to be true. If one decided to get a PPL(H) as a first step nudge nudge wink wink, to being a professional helicopter flyer one could set up as a self employed helicopter instructor/driver register for VAT using a business plan that prioved in x years I will be hiring myself out for £££, claim back the VAT on all training costs a/c hire fuel WHY on th ehope of future income. When I get my PPL(H) Irealise that I am never going to cut it as a professional pilot, so can the idea, thank you very much C&E. Or I suppose I could keep struggling on hours building and never make the grade. Perhaps from a credibilty point of view it would be better to conspire to fail a class 1

Is that a fair summary, and if so why isn't every single PPL trainee doing it?

[ClearBlueWater]

Ludwig, VAT office may be pedantic but it's not stupid. They'll suss you out and recliam their tax with additional interest. Also, abuse of the system leads to it being changed to the detriment of legitimate claimants. This is what happened a few years ago when Gordon Brown decided that a system that allowed trainees to make tax claims against costs for flight training (and diving and sailing etc) would be abolished as folk were taking the piss. Cheers to those that took the tax credit but didn't actually intend to become professional pilots, it's meant that subsequently it costs an extra 20 grand to become a FI (H) as compared with costs 5 years ago.

Rotormad, you're right in that you would likely have to really go through the mill with HMC&E if you have employee status in respect of one job with the company for whom you wish to freelance in respect of another. That said you might still pull it off if you explain clearly the situation and the VAT officer is open minded to your explanation (not likely). Alternative sources of income should not conflict with a wholly separate business claim.

Go-around, the VAT office may wish to claim back a proportion of the VAT repaid if you end up becoming an employee of a company soon after being free lance. Same applies if you don't make any VAT returns after claiming VAT back i.e. don't work and therefore don't earn anything. There's no hard and fast rule for these situations, which do arise of course. It depends on the credibility of your circumstances and the zeal of the VAT officer concerned.

[Whirlybird]

FWIW, I work as a self-employed researcher/writer, mainly - but not exclusively - for one company. Since ALL your businesses, or none, have to be VAT registered, I registered this for VAT when I set up my helicopter pilot business, saying that the writing was my main business. In due course I got a "courtesy call" from my local VAT office. I explained the whole situation quite honestly, asking again if it was OK, and was told it was. I was then asked my turnover, which is way below the VAT threshold. She said: "So why have you registered for VAT; oh, I see, it's becuse you want to claim it back on your helicopter training". I said that was the case, and she seemed to think that was fine. She said I might have a visit "just to check you're coping with the paperwork" but so far the visit hasn't materialised. The company I mainly work for said it probably won't; they'll realise they're not likely to make much out of me right now, and won't bother coming out. I'm relying on being totally open and honest about what I'm doing...and keeping my fingers crossed.

[TheFlyingSquirrel]

Can you reclaim the VAT on training costs?

Has anyone succesfully claimed a refund on the VAT element on flight training simply by writing to excise and outlining your situation? I understand it can be done without putting it through a company under certain circumtances - anyone?

[Spunk]

Well, FlyingSquirrel, I don't know about the tax system in England (?) but over here you don't have to pay for the VAT as long as it is considered to be training for a commercial licence.

For the PPL part this is only true if you are enrolled in a commercial course from "pedestrian" to "CPL". If you enrole for the PPL first and go for the CPL add-on, than you are screwed. VAT refund only for the CPL-part.

A friend of mine was actually able to set off his entire training costs (travel expenses, books, etc.) against tax liability.

A good tax adviser might be useful.