Reclaiming VAT
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Reclaiming VAT
Ladies and Gents
A very dull topic, but does anyone know the position with respect to claiming VAT back on training costs (before I spend timing discussing it with the VAT men)?
Thanks
FANS
A very dull topic, but does anyone know the position with respect to claiming VAT back on training costs (before I spend timing discussing it with the VAT men)?
Thanks
FANS
Hovering AND talking
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Yes! If you have a valid business case to be self-employed after you qualify, then you could reclaim VAT. If you become an employee after you qualify, then you can't.
There are many threads on this subject on pprune. Use google to search "VAT reclaim site: pprune.org" as the search engine here can't cope with TLAs!
Cheers
Whirls
There are many threads on this subject on pprune. Use google to search "VAT reclaim site: pprune.org" as the search engine here can't cope with TLAs!
Cheers
Whirls
Educated Hillbilly
On initial training no. Tax relief on flight training was phased out back in 2002.
If you are working as a self employed/contract pilot through a limited company then it may be possible to claim back VAT on renewal/ revalidations expenses, but for initial training in the UK you will have to pay the VAT.
Seems as though Whirls was writing the reply at the same time as me and beat me to posting the answer.
But as a freshly qualified pilot you with low experience it would almost be near impossible for you to work on a self employed basis.
If you are working as a self employed/contract pilot through a limited company then it may be possible to claim back VAT on renewal/ revalidations expenses, but for initial training in the UK you will have to pay the VAT.
Seems as though Whirls was writing the reply at the same time as me and beat me to posting the answer.
But as a freshly qualified pilot you with low experience it would almost be near impossible for you to work on a self employed basis.
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You have to be registered for VAT and you can only do this if you have a turnover of at least £65,000.00 [not quite sure if this figure has been changed as the threshold]
You would also need a good story for the Customs & Excise VAT Office as to your reasons. i.e. your training is a legitimate part of your business
You would also need a good story for the Customs & Excise VAT Office as to your reasons. i.e. your training is a legitimate part of your business
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Originally Posted by jammydonut
you can only do this if you have a turnover of at least £65,000.00
Portsharbourflyer, it depends what you mean by initial training. If you follow the modular route, then it's unlikely the PPL element would be allowable for VAT; however, IF self-employed/freelance status is the plan, then VAT could be reclaimed on the CPL element. This is reasonably common in the rotary world since many helicopter pilots are self-employed. It may not be so common in the fixed wing world. If one registered for VAT with the business plan of being freelance and then became an employee once qualified, then you would be liable to pay back the VAT reclaimed.
You don't have to be a limited company to become self-employed.
What cannot be claimed is the cost of training against income tax.
As everyone's circumstances are different, I would recommend that anyone thinking of doing this goes to a Chartered or Certified Accountant for advice; preferably one who has experience of the aviation industry.
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Whirls
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I was going to ask what about Ryanair pilots, because officially they aren't employees of Ryanair, surely this means that them working for them as anything else could be turned into a business and taxes re-claimed?
Excuse me if I'm way off the mark, not sure what the official position of pilots within Ryanair.
Excuse me if I'm way off the mark, not sure what the official position of pilots within Ryanair.
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because officially they aren't employees of Ryanair
If Ryanair are operating under another country's rules (i.e. Ireland's), any self-employed pilot would not be making a UK VAT-able supply to Ryanair and so the rules could be entirely different.
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Whirls
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As with the other posts my understanding is that in order to recover the VAT then a) you would need to be self employed and b) registered for VAT. BUT if you are registered for VAT then you in turn will need to charge it on any "invoices" you raise on the airline . Will this be acceptable?. In addition it's very unlikely that you will be able to recover any VAT incurred with respect to supplies made prior to you registering for VAT
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Thanks for the replies.
I will register a Newco for VAT and claim back the VAT on the basis that I intend to provide pilot services by Newco.
The issue of being an employee may have to be crossed at that junction of employment.
We are talking big numbers and it is interesting that some of the ab-initio courses where a student is backed by an airline from the outset involve the student effectively effectively paying back the VAT.
I will register a Newco for VAT and claim back the VAT on the basis that I intend to provide pilot services by Newco.
The issue of being an employee may have to be crossed at that junction of employment.
We are talking big numbers and it is interesting that some of the ab-initio courses where a student is backed by an airline from the outset involve the student effectively effectively paying back the VAT.
Educated Hillbilly
Whirly,
In past threads we have already discussed this issue.
However when I refer to initial training I mean up to CPL/IR fATPL level. The problem lies that to be self employed or to work as a contract pilot in the fixed wing world you would probably need at least 500 hours on type with respect to airline work. A freelance air taxi pilot is going to need 700 tt hours plus 40 p1 multi. My personal view is that a restricted instructor needs to be supervised therefore they cannot truly be self employed (Whirly I know you disagree with this viewpoint but as said this has been discussed to death previoulsy).
So the problem in the fixed wing world is you cannot after training have the experience needed for freelance work.
Ryanair cadet/sstr pilots subsequently working through the Brookfields contracts are in terms of the UK IR35 rules "disguised employees", however one can only assume the Southern Irish government isn't that concerned about this issue. The UK government has been having a real clampdown on this in previous years.
FANS, I would suggest you do more research into this than the posts on this forum, trying to use limited companies to obtain tax benefits that you would not otherwise be entitled to can lead to you having to payback any incorrectly claimed tax at a later date (weather VAT or relief against income) and may even be deemed financial fraud.
In past threads we have already discussed this issue.
However when I refer to initial training I mean up to CPL/IR fATPL level. The problem lies that to be self employed or to work as a contract pilot in the fixed wing world you would probably need at least 500 hours on type with respect to airline work. A freelance air taxi pilot is going to need 700 tt hours plus 40 p1 multi. My personal view is that a restricted instructor needs to be supervised therefore they cannot truly be self employed (Whirly I know you disagree with this viewpoint but as said this has been discussed to death previoulsy).
So the problem in the fixed wing world is you cannot after training have the experience needed for freelance work.
Ryanair cadet/sstr pilots subsequently working through the Brookfields contracts are in terms of the UK IR35 rules "disguised employees", however one can only assume the Southern Irish government isn't that concerned about this issue. The UK government has been having a real clampdown on this in previous years.
FANS, I would suggest you do more research into this than the posts on this forum, trying to use limited companies to obtain tax benefits that you would not otherwise be entitled to can lead to you having to payback any incorrectly claimed tax at a later date (weather VAT or relief against income) and may even be deemed financial fraud.
Last edited by portsharbourflyer; 5th Oct 2008 at 20:37.
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Portsharbourflyer, I'm not aware of having any "free and frank exchanges of views" with you over tax but you may well have done so with my friend Whirlybird!
However, in the rotary world, self-employed helicopter pilots are reasonably commonplace. This does not negate the tax rules simply because those employment structures do not exist within the fixed wing world.
It is true that one of the criteria of self-employment is whether the self-employed can be told how to do his or her job by the person who contracted his or her services. Obviously, as a restricted instructor, the mechanism must be in place for a Chief Instructor to tell that person how to do the job. In reality, HMR&C are usually more pragmatic than that and understand that the six "self-employed" criteria may not be fulfilled in the first year or so of business i.e. working for several clients, using own tools and equipment etc.
I speak not as an instructor but as an accountant!
Cheers
Whirls (not to be confused!)
However, in the rotary world, self-employed helicopter pilots are reasonably commonplace. This does not negate the tax rules simply because those employment structures do not exist within the fixed wing world.
It is true that one of the criteria of self-employment is whether the self-employed can be told how to do his or her job by the person who contracted his or her services. Obviously, as a restricted instructor, the mechanism must be in place for a Chief Instructor to tell that person how to do the job. In reality, HMR&C are usually more pragmatic than that and understand that the six "self-employed" criteria may not be fulfilled in the first year or so of business i.e. working for several clients, using own tools and equipment etc.
I speak not as an instructor but as an accountant!
Cheers
Whirls (not to be confused!)
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As a former Officer of HM Customs and Excise (as was) myself albeit categorically NOT a VAT man, I have a little knowledge here. I would advise against some of the dodges being advocated here. It is certainly true that obtaining VAT registration is not difficult, although the VAT office don't dole them out as freely as they have done, largely due to VAT carousel fraud.
However, the wise old VAT man can spot the sort of 'companies' being advocated a mile off. It doesn't take a consultant from KPMG to work out that a company isn't trading regularly, isn't being run properly as a company etc... Submitting your first VAT re-claim for £50K's worth of pilot training WILL NOT WORK.
How many people do you think there are out there who hit on the bright idea of claiming VAT back from significant purchases on the basis of a new business. Virtually all small businesses fiddle the VAT, it's just a matter of degrees. It's the greedy that get caught. But...you've got get established and play by the rules before you can safely operate under the VAT office's radar whilst having those days working for 'yourself.'
However, the wise old VAT man can spot the sort of 'companies' being advocated a mile off. It doesn't take a consultant from KPMG to work out that a company isn't trading regularly, isn't being run properly as a company etc... Submitting your first VAT re-claim for £50K's worth of pilot training WILL NOT WORK.
How many people do you think there are out there who hit on the bright idea of claiming VAT back from significant purchases on the basis of a new business. Virtually all small businesses fiddle the VAT, it's just a matter of degrees. It's the greedy that get caught. But...you've got get established and play by the rules before you can safely operate under the VAT office's radar whilst having those days working for 'yourself.'
