tax question

[UAV689]

Hi All

An accountant friend (large buisness accountant rather a personal one) floated this idea to me the other day, and I wondered if anyone else has done the same thing, is it possible?

Do the CPL, register a company, then when you do the IR claim VAT back on that.

He said the idea being, that you can earn money with a CPL, albiet not with airlines, and the IR part of the course is further training with you can get tax back on. He said the general theory is you cant claim tax back on a course to enable you to start the company, but further courses that you take can be claimed on.

Anyone else have any experience of this?

[Whirlygig]

This has been asked lots of times before and the crux of the matter is whether, as a commercial pilot, you will be paid as an employee by an operator or whether that operator is happy to accept invoices from your company for your services.

It is do-able in theory but you have to be very careful how your business is set up and, if after getting the IR, you work for an airline as an employee, HMR&C could demand the VAT back.

Just bear in mind an accountant's fees to set it up properly may offset the VAT saving so it's only worthwhile if you genuinely want to work on a freelance basis.

Cheers

Whirls

[UAV689]

thanks Whirls -

if you worked for an airline as a regular PAYE employee, but put an invoice through once a month for a pleasure flight and kept the company trading, that should keep them happy would it not? Or would they demand a level of buisness being traded, e.g. a certain turnover?

[Ryan5252]

if you worked for an airline as a regular PAYE employee, but put an invoice through once a month for a pleasure flight and kept the company trading, that should keep them happy would it not? Or would they demand a level of buisness being traded, e.g. a certain turnover?

Assuming you have a valid AOC for the 'pleasure flight'?

[UAV689]

of course if there was an AOC, to be honest you could probably just put an invoice in and they are not going to know if it is for a flight or not, you could just call it pilot consulting fee or something like that....

[Whirlygig]

If you flew a pleasure flight for an AOC holder and invoiced them for consultancy, do you really think the operator woudn't spot that on your invoice? And do you think they pay your invoice if you submitted false ones?

Of course if you've gone to the expense of setting up your own AOC for these casual pleasure flights, then there would be no invoice.

Cheers

Whirls

[UAV689]

doesnt have to be a consulting fee for a flight does it!

who is to say a friend does not just write you a cheque for a pilot consultancy fee...no flying, no AOC needed, bust said fee could be for say pilot expertise on an aviation matter that needed a CPL/IR advice.

I just dont want to give the government my hard earned VAT cash for training when every other job is VAT free training!

[Whirlygig]

So, a friend gives you money for services not rendered? And you pay it back? Are you talking about false accounting and tax evasion?

If you can't account for the VAT legitimately, then don't register.

Why not go to Norway and do your IR there where's they don't charge VAT. :ugh:

Cheers

Whirls

[Ryan5252]

Same scenario(ish).

Supposing one is the son of a FI who operates his own Ltd company as flying school. The son is employed as a dogsbody cleaning aircraft etc in exchange for sponorship through to CPL. It is hoped that he will later take over the role of Instructor. Supposing he achieved his CPL and then saught an IR, could he claim tax back on the IR on the same principle?

Just to add, unfortunately I am not the 'Son' and I pay for my own aircraft hire. The above is just an example scenario to see how it might work....

[Whirlygig]

The son is employed as a dogsbody cleaning aircraft etc in exchange for sponorship through to CPL.The flying school can reclaim the VAT as thay are paying for employee training.

and then saught an IR, could he claim tax back on the IR on the same principle?I'm sorry but this doesn't make sense.

If the flying school sponsored and paid for the son to do the IR, then as above. But, as the son is employed as a dogsbody/junior CPL, the son cannot then register for VAT and invoice the flying school, thus reclaiming VAT on training which he, the son, is paying for.

Of course, if the school pays for the training and the son does not work for them, then HMR&C could deem the training to be a benefit in kind and you'd have to pay income tax on the training (including VAT).

VAT can be reclaimable but only if you are going to be genuinely self-employed/freelance. If not, be prepared to be caught out. Believe me, you are not the first to think of the evasion methods and you won't be the last.

Cheers

Whirls

[Ryan5252]

Great job, Cheers Whirls! :)

[Whirlygig]

No, you can voluntarily register for VAT at any level of turnover but, when your turnover exceeds £60k, you must register for VAT.

Cheers

Whirls

[BoeingDreamer]

Threshold limit is now £70K, but anyway agree to much work compared to any relative lousy gain and extra headaches!

[suraci]

I dont know where "every other job is VAT free training" comes from. Pay for training to learn drive a truck or bus and you'll pay VAT.

[Halfwayback]

This subject has been covered a number of times and I think there are enough answers here to cover the OP's question.

Thread closed

HWB