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

[Whirlybird]

FlyingSquirrel,

I and several others have done it, but you will need to put it through a company in the sense that you tell them you're a helicopter pilot, a sole trader. Any half-decent accountant will tell you what to do, though you might have problems getting them to believe that it's possible to claim VAT on training. There's also a VAT helpline; I can't remember the number, but again, an accountant should have it. Once it's set up you can easily do it all yourself, so you'll only have to pay an accountant's fee the once.

[bladewashout]

Did you carry on with the company and do your instructing through it? (e.g. you invoice your clients rather than getting PAYE?)?

Also, did you do it for the initial PPL stage, or only the CPL/ATPL?

I had considered doing the same thing but was advised that recovery for the initial training might be difficult to achieve, but recovery post-PPL is easier.

BW

[Whirlybird]

bladewashout,

I didn't find out about it till after I got my PPL and started hourbuilding. I do know people who did it for the PPL too; they tended to get asked to present a business plan and similar things, but it seemed to work.

Instrucing is usually on a self-employed basis, so I invoice the schools and include VAT; they don't care since they're VAT registered anyway.

[Camp Freddie]

Hi there,

I voluntary registered for VAT from the outset of my PPL training,
you are required to provide evidence that you intend to trade in your own right i.e self employed (not become a PAYE employee) once quailfied as a flight instructor/commercial pilot.

I provided a "business overview" rather than a full business plan which was about 3 or 4 pages long and provided a background to the industry, my place within it, how I would be charging VAT to my customers etc etc.

however my voluntary regsitration was however refused on the basis that I had not provided enough evidence of "intent to trade " by an inspector who when I phoned her to chat about the reasons was particularly abrupt and unhelpful.

at this point I hired professional help who after a delay and appeal to the controller of that VAT unit, succesfully got my registration accepted.

I therefore got all the VAT back on all the PPL, Hourbuilding and CPL training, Instructor course etc, however I was advised that there is a quid pro quo.

i.e. they expect you to charge VAT to your customers (e.g. the flight school) and pass back this VAT to the customs and excise. this makes no difference to the flight school as they claim it back.

but it could be an issue for you if you 1) get a salaried job with a flight school and therefore dont charge VAT or maybe 2) you piss of to the north sea or something and therefore again are not trading as they expected.

I believe anecdotally that if you have claimed all that money back which could be £10k or so these days, that you may not be off the hook with customs and excise until they have recieved at least the equivalent amount back from you which may take you a number of years depending on your work rate. and you may be liable for the shortfall if you never get there.

this is no problem for me as I have paid them back far more now than I reclaimed from them, but potentially this could be an issue for new starters.

so the bottom line is be careful out there and get professional help

regards

CF

[madman1145]

In Denmark it works this way ..

I myself is a modulary student, did my PPL(H) last summer, doing hourbuilding now along with ATPL(H) theory. After that, the CPL(H) will be completed ..
To get the VAT returned in Denmark as a modulary student, I just have to complete the CPL(H) after the PPL(H) and ATPL(H) theory or with no more than 1 year of break in between and as long as I have signed a contract with the respective FTO for completing a CPL(H) before starting on the PPL(H) ..
Then the Danish government consider it all as one education ..
Nothing else to it over here ..

Also the IR-rating is VAT free in Denmark, when the pilot has a CPL(H) ..

Kind of strange that things are so different from one EU country to another ..

[Johe02]

I went to a 'tribunal' on this one. . turned out to be a test case. The final ruling was, I could claim VAT back 3 years previous to my first invoice.

The case made my accountants trade press and the ruling was viewed as a harsh decision considering my circumstances. . Sole trader with transport business, thus establishing a 'nexus'

Good luck. .

[helicopter-redeye]

My illustrious (UK) accountants take the view that claiming the VAT back on flight training (i.e. for the ATPL course) could be done through a VAT registered entity (company) would may then have a P11D implication in terms of benefit in kind.

Gordon gets ya either way ...

[Head Bolt]

It is possible to claim the VAT back on flight training, either as an individual or as a limited company, for all expenditure up to 6 years previous to the application.

The critical point is that you need to be able to prove that you INTEND to make sales that will be VAT rated once you are qualified - note that you do not have to prove that you definitely will, as none of us can do that, but that you INTEND to.

You therefore register for VAT as an 'intending trader', any accountant will do this for you for less than £100, it's a standard form.

The good news is that if you get VAT relief and then subsequently do not trade for VAT purposes, there is no mechanism for the VAT man to claim his money back - hence the need to prove the 'intent' to trade.

[TheFlyingSquirrel]

Thanks for the info guys - Can I claim back all the FW stuff i've done in the past 6 years too? Do you think they will have a problem with this?

[Whirlygig]

As a Chartered Accountant, I am not happy with some of the advice given on this page as it conflicts with my current knowledge and, until I have done further research, I wouldn't be prepared to comment.

However, the VAT registration is form is downloadable from the internet and is a relatively simply form to complete but you must have some plan as to expected turnover, costs and timescales. HM Customs and Excise are usually helpful these days and can give you much of the advice you require. Don't be afraid to ask them. Also, the decision as to whether you qualify can rest with an individual inspector so if you are unsuccessful, you can appeal.

HM Customs and Excise are a very powerful body (more so than the police!) and yes, they do have a mechanism for getting it back - they demand it back.

Cheers

Whirlygig

[TheFlyingSquirrel]

So dear Whirly - would you discount Head Bolt's info above or would you say it's all or partially Kosher? I have a lot of receipts here - can I claim the VAT on all elements of training, VAT on landing fees, fuel, books etc? I understand even parts of the distance learning course can be claimed for. We're talking a lot of dough here - Enough for another large chunk of training for me !

TFS

[Whirlygig]

The Flying Squirrel,

Please read your PMs.

Cheers

Whirlygig

[Head Bolt]

FS

There will always be conflicting advice and differences of opinion as to what can and can't be done with regards to VAT, and mostly the VAT people don't always know either.

I am not an accountant but have been in business over 20 years, and survived many a VAT audit. Whirlygig obviously knows VAT law better than me, but I hope the info I posted will help you.

I have checked with my auditor again, and I am advised that provided that you show the proper INTENT to make VATable sales, there is no ruling under which the VAT man can claim the VAT back if you subsequently do not do so.

Remember, whilst Whirlygig is quite right about the size and power of the C & E, they cannot make up rules as they go along, and a demand for payment does not mean it is due.

Get some good advice and go with what you think is right for you, there is a lot to be gained.

[helicopter-redeye]

FS, your not spending all that cash for fun right? I guess there has to be some intent there (watch the P11D thou')

h-r

[Whirlygig]

The P11D only applies to salaried employees.

One can set up a company and pay oneself through PAYE on a payroll system and then be subject to taxation on benefits in kind (form P11D - completed by your employer - er - you!).

However, one can be a "sole trader" or "proprietor" without a limited company (and all the hassles THAT involves).

In either case, if you put expenses through your business account which are for private purposes, they will not qualify for tax relief.

Therefore, if there is an element of your flying which is for pleasure (and why would it be - we all hate it!), both HMC&E and HMIT (Inspector of Taxes) MAY (only may) wish to disallow a proportion.

The P11D has nothing to do with VAT.

1 no. minefield opened up here!

Cheers

Whirlygig

[helicopter-redeye]

Maybe I used the wrong term. I MEANT to say 'watch out for the benefit in kind' which may be accrued if you are the director of the company you set up with the purpose (non exclusive) of getting VAT back on training, etc

Here is the (original) exhaustive reply

I have therefore, put my argument in writting and suggested that there is in fact no chargeable benefit in kind as you pay a suitable fee and that it would be equitable to grant a dispensation from completing forms P11D...... Also, we need to discuss the potential benefit if the Company pays for your flying training. I believe that you will be taxable, but the Company will be entitled to tax relief on employee costs.

There being no employee costs, there would have been no relief. However I note the use of the P11D word in my accountants reply.

He may be taking twaddle. If so I would be interested to hear ...

[bladewashout]

Probably obvious already, but a director of Ltd. co. has to fill out P11Ds even if unsalaried (unfortunately!).

What we have done is to buy a Robinson with a ltd. co and are leasing it back to a training school. I'm paying personally (and outside the company) for all my current PPL(H) training without using my own helicopter, but then I want to do a CPL and instructor rating using the purchased helicopter for training, probably renting just the instructors through the leaseback flying school.

Hopefully the company's income from leaseback could cover the training costs.

I will buy my personal use of the company's helicopter (i.e. any hours I am not being instructed) at the same rates as the leaseback company pays, which is cheaper than normal hourly rent rates but still 'market' rates in this context.

The question is whether in this context the VAT is recoverable to train a PPL(H) qualified director for CPL with a view to extending the company's income stream to include instruction or air-taxi. The secondary issue is whether the costs of in-house training for the purely commercial skills required to make that extension are a benefit in kind to the director (me!). Probably falls into some kind of training tax legislation.

My own view is that if I pay a decent slug to the company for private flying, I can argue that there is no benefit in kind (what use is a CPL other than within the context of an aviation related business?), and as the skills development is purely business related, the VAT should be recoverable.

It will always be grey, but as the company is trading and money is coming in and going out, it's a 'whiter' shade of grey than if the company was purely spending money on training that wasn't being earned.

Lastly (long post), because most of the cost of running an R22 pops up in depreciation, you can keep the company quite profitable for a year or so, and the losses come up as a big write off when you sell the helicopter. So it won't attract the same attention as a company set up which loses money from day 1!

BW

[helicopter-redeye]

My own view is that if I pay a decent slug to the company for private flying, I can argue that there is no benefit in kind

We are talking taxman and VATman here, thus (as the saying goes), assume nothing ....

Careful tax planning also reqd, once the money has been paid, if the m. Le Inspecteur subsequently admits overzealous collection, they keep the money anyway and apply the new ruling from the date of the new decision.

There is a tax man out there who failed to understand we hired out helicopters and so we paid too much tax (where do they GET these people....)

h-r

[bladewashout]

I think that the benefit-in-kind issue is covered by this piece of legislation.

http://www.legislation.hmso.gov.uk/a...3/30001--z.htm

The summary I take from it is that if the costs of training are solely the costs of providing work-related training, including the use of a company asset to provide that training, then there is no taxable benefit.

By paying for 'pleasure, or 'own use', and as long as you are strictly honest about how you do it, then this legislation can be interpreted as covering commercial training. It would be reasonable to interpret the legislation such that if you were to limit the recovery to only those flights where an instructor was present, or specifically directed as required by an instructor, or the costs of relevant exams and training courses, then it should not be considered as a benefit in kind!

BW

[TheFlyingSquirrel]

thanks to everyone who has responded.

I have it in writing from C&E. 6 months prior to registration for flight training and 3 years for goods in hand, ie computers etc, can be VAT reclaimed - but boy do they ask some questions ! So well worth making an application as soon as possible in a flying career.