Claiming Back VAT

[topcat450]

Dunno if anyone in here can help re: claiming back VAT from training costs...I know a lot of heli pilots seem to do this.

We'll theres a discussion going on in:
PPRuNe Forums » Flight Deck Forums » Terms and Endearment

And we'd appreciate your help...free beer to the first guy to tell us how to do it and save us ££££:ok:

(I'll delete this in a day or so from here)

[whirlycopter]

Try this but don't come after me if it goes wrong, you need to be very careful about this and best really to get someone who knows what theyre doing to set it all up;



Set up a limited company and register for VAT,

Write a business plan including details of how you are going to generate taxable income, ie who your clients will be, ideally this should be a number of different flying schools, you will need this to justify your registration.

Find someone who provides services through a limited company (IR35 compliant), I find my wife useful for this amonst other things.

Get them to bill through your company thus generating output VAT while you are training.

Claim back the input VAT on your training.

You can also ofset your training cost against the revenue earned by the other person thus reducing income tax liabilities.

By insurance to cover the fees of the resulting investigation by Customs and inland revenue.

Whilst your at it might as well pay scale charge and fuel benefit tax and put all your road fuel through the company too.

[Ludwig]

Now that's a really good wheeze, except that it sounds a tiency wiency bit like, well, I hesitate to say, but the f word

fraud.

Just my opinion. :ok:

I do suggest quite strongly that you take advice before doing this. If you register for VAT, do the right thing but it proves to be unacceptable, that's one thing, but to setout to systematically defraud c&e, expext to go to prison!

[Whirlybird]

THIS IS QUITE LEGAL!!!!!!!!!!!!!!

I was told about it by my flying instructor, and I asked an accountant, who told me to phone the VAT helpline and check. I did, and they said it was fine. I didn't set up a limited company; I simply said I was a sole trader, a helicopter pilot, training at the moment. Being self-employed anyway, I had to register my day job for VAT too, but that actually saved me money. My accountant set it all up for me, although I do my own quarterly returns now, as it's very easy.

Don't believe it? Well, a couple of months later, I got a phone call from my VAT office, to ask me how I was getting on. I told them fine, and asked again if it was legal to claim training costs, emphasising (honest soul that I am) that I wasn't likely to be earning any money from helicopter flying for at least a couple of years. ""Helicopter pilot?" said the lady: "That's interesting. Never had one of those. Some training you can and some you can't; let me look it up". She did and assured me it was quite legal. After a bit of further chat, she asked what my turnover was. She then told me I was well below the VAT threshold, but then: "Oh, I see, you just registered to claim back VAT on your helicopter training really, didn't you?". I said yes, I had, and she said that was quite legal.

Now, I'm not a guy, I'm one of the other sort, but...WHEN DO I GET THAT BEER? :)

[topcat450]

Whirlybird...you're a true diamond in a shingle beach. :)

I'll shout you to a beer if I see ya' at a future event...especially now I know your "the other sort"...AND you can fly a chopper... you'll easily recognise me...I'll be the one drooling at your feet. ;)

[whirlycopter]

It's not fraud!

You are claiming back expenses related to setting up a business that will generate VATable sales. That's how the system works.

Wouldn't mind a pint myself......

[Ludwig]

I wasn't refering to the claiming back bit, just the manufacturing of income by diverting someone elses supply through you to create a false picture of your business. There is a point at which aggresive tax planning crosses the line from a good scheme to something unacceptable. I have no problem with setting up an arrangement toclaim back vat or whatever, but I would not advise incorporating into that scheme an illusion designed to create the appearance of something that does not exist.

Also, for what it's worth, I suggest that when setting up a scheme, don't just look at the vat issues, be aware of the other taxes and how they interact with what you are doing., are you, for example, walking into an unexpected income tax liability?

Assuming you can convince customs that there is commerciality in your scheme, because they do not have to accept a voluntary registration, once you have done your training and recovered the vat, think about deregistration, especially if you go off to the airlines rather than freelance; as it is likley that the company will have no tangible assets on which vat has been reclaimed, or if it does it will be below the deminimus, you could deregister without having to refund the vat, after all, it's not your fault that after years of training there was no call for your skills/you were a useless business owner/you found you couldn't hack it/ or whatever other reason you care to come up with at the point of deregistration.
:ok:

[Whirlybird]

Oooo, topcat, no-one's ever called me a diamond on a shingle beach before. Are you going to the Gatbash? ;)

Actually, it's just the beer I'm after. :)

[topcat450]

:ugh: See, that's why I got a D minus at Charm school, I never did pick the right lines.

[Whirlybird]

Going back to VAT ;) .....

One thing I forgot to mention, you do have to expect after finishing training to be self-employed and therefore charging VAT. I don't know what happens if you change your mind. But anyway, I guess if you're planning to be the employee of an airline or something it could be a problem, though if you're going to instruct to hourbuild first it should be OK.

At least...I think so...

[rotormad]

Yeah there could be a problem there. Everything Whirly's written is spot on, i've done exactly the same thing and my accountant has assured me it's all above board, only problem is that like whirly say's you have to stay self-employed after you qualify. If you go work for a big airline or as i would like to do, NS job you could be well and truly knackered having to pay all the VAT back in one fell swoop.....nice. Well that's what i've been told.

Whirly, nice to meet you today and as this message is testiment..i survived the flight...just.

Rotormad

[Whirlybird]

Glad you survived rotormad , and nice to meet you too. Though I still don't quite believe it...you ask me if I'm learning to fly or what, all I say is that I'm a newly qualified helicopter instructor and also a very rusty PPL(A)...and you instantly say: "You're Whirlybird".

I dunno why I don't just introduce myself as Whirlybird to everyone from now on. :D

[rotormad]

Well everybody know's the Whirlybird.....just guessed, bloody good one though wasn't it;)

[Whirlybird]

rotormad,
Yep, go to the top of the class. :ok: :) Though this happened several times at Thruxton too, so I'm beginning to think I'm just instantly recognisable, somehow. :eek:

[EESDL]

Whirlybird
I'm confused lady!
You've registered for VAT, which we have all agreed is beneficial whilst training but, at some point in the not-to-distant future you will have to start earning. Doesn't that mean you will have to start charging VAT on your rates (assuming that you are not receiving a wage but an hourly rate whilst 'freelancing' for permenant work).

So that means you will either have to accept less or charge companies above the going rate by the VAT rate!

I thought that was why the threshold was there, to give a prospective business an idea of whether it was worth the trouble?

I'm looking to do a similiar thing as yourself with my 'company' (whilst undergoing a rating) but can't get past this point.........advice readily and willingly accepted.

[whirlycopter]

It's more than likely that if you a billing a flying school they will also be vat registered and therefore they too can reclaim the VAT. So no need to change your rate - the VAT element is irrelevant to the school.