Claim back tax and expenses for type rating?

[electriclightfoot]

Sorry if this is a repost.

I passed the Wizzair assessment and start a self-funded T/R very shortly in Amsterdam with a company called FSC. The cost of rating is €14399 euros including Dutch VAT at 21%. Can I claim back the 21% VAT and related expenses hotel etc? I've asked FSC but they say they don't know.

I'm from the UK and always been employed during my working career. I'm out of my comfort zone and feel a bit intimidated by the whole tax system, setting up companies etc. Can anyone offer me some advice or point me towards someone who deals with this sort of thing.

Thanking you in advance peeps.

[skyflyer737]

You might be able to reclaim the VAT but you'd need to register for VAT either as a Limited Company or as self employed. Irritatingly you cannot offset the cost of your type rating against income for tax purposes in the UK. I know people who have done it, but if HMRC catch you, you'll have to pay it back and may be fined. It's not an allowable expense under UK law.

You need to see an accountant / tax advisor really. It all depends if you will be employed by Wizzair or work for them as a contractor.

[Kirks gusset]

The relationship between UK and Holland is complicated:

A VAT-registered UK business importing goods ( read training) from the Netherlands should give the Dutch supplier its UK VAT registration number (including the GB prefix) so that Dutch BTW does not get charged. If BTW is charged, the UK business cannot reclaim it on their UK VAT return or by a direct claim to the Dutch tax authorities. The best that the UK business can do in these circumstances is to confirm its VAT registration number to the Dutch supplier, then ask for a full credit note and for the goods to be re-invoiced without BTW.

Best option, forget it and concentrate on being a pilot not an accountant!

[fox niner]

In the dutch tax system in general, if you make expenses that are directly related to your profession, those expenses are deductible from your income. Above a certain amount. But you have to be employed in the netherlands. So not only your VAT, but also the whole cost of te entire FSC bill.
Contact the dutch ALPA for more info.
BTW, being a member of any union is also deductible...

[electriclightfoot]

Thank you for your replies.

You've confirmed my initial thoughts on this and I think it's a can of worms I'd rather not open. Eventhough that money could have bought me a bloody good holiday somewhere, I don't think I'll bother.

Many thanks again chaps.

[irish777]

First of all I would ignore any advise any pilot gives you like most of what is on this thread.
Ask an accountant.
I reclaimed 100% of my Netherlands VAT on a type rating at CAE in Amsterdam, I did it myself by completing a simple form by the Dutch tax authority. I just had to provide my UK VAT certificate/self employment proof and it was in my bank account in a few months. Same with the cost of the type rating, I offset it entirely as a business expense, check with your accountant and not pprune!

[electriclightfoot]

Tax

Thanks irish, you're a star. I will contact an accountant straight away.

[Kirks gusset]

Irish 777 we note your valuable comments and also observe that you " provided your UK VAT registration" isn't this the whole point? the poster would have to register for VAT before they could claim it back, the UK Customs and Excise require detailed information now before you can register and probably the cost of forming a company, getting an accountant, or registering as self employed is in excess of the amount that can be claimed back. Many years ago I did this route for Ryanair and was pi%%ed off every quarter filling in VAT returns, even if " NIL" return and then having to have the compulsory VAT audit for de-registration. It isn't as simple as you relate and my accountant fees are free from my family! Oh, and to claim the cost of the type rating as a business expense... you still have to pay it and you must be "in business" and receiving income to off-set against tax as a cost.. that stands to reason.

[portsharbourflyer]

As far as UK law is concerned.

Just because you claim to be self employed doesn't mean HMRC consider you are.

The moment you start using Ltd companies or self employed status to gain tax benefits you may be audited (unlikely) to prove your actual self employed status.

IR35 is a real grey area, but you need to show the inland revenue that you are a freelance contractor providing services to another company rather than a disguised employee.

If HMRC decides you are a "disguised employee" rather than truly self employed that is when HMRC will come after you for any falsely claimed tax benefit or unpaid tax due, on top they will charge interest and also any subsequent court fees you could be liable for.

Electriclightfoot, if this is your first commercial job then afraid to say HMRC would see you setting up a limited company then attempting to claim tax benefits as blatant disguised employment and is viewed as an attempt at dodging tax.

If you have previous experience working as a commercial pilot then you have a viable case for starting a limited company that offers piloting services.

[irish777]

Setting up as self employed and registering for VAT took about 30 minutes and I did it myself. I think the VAT repayment was about £5k and accountant fees circa £350pa so well worth the effort. I also made quite a bit by being flat rated for VAT and invoicing Brookfield for VAT in my RYR days. You can do your own accounts and VAT in a spreadsheet and get your accountant to review before submission.
Just get a proactive accountant who is willing to look at all the best options to save you money, not the easiest for him! I went around 4 or 5 to see how they were before using one.
I few with lots of idiots including one guy who just paid 40% tax like he was employed and didn't bother offsetting any expenses and another who paid zero tax and hoped he would get away with it. Just don't take financial advice from pilots - I may have mentioned this already

[portsharbourflyer]

Irish777, do you understand anything about IR35 compliance?

Suggest you look up the dragonfly case (99k bill for the individual involved), to see what happens if you fail an IR35 investigation.

It is very easy anyone to register a limited company, doesn't mean you are compliant with tax law just because you declare yourself self employed.

I would also like to point out if you are not deemed IR35 compliant it isn't your accountants that will get done, it is you personally.

Most get away with it because it is near impossible for HMRC to fully audit all those offering services through ltd companies. However when they do catch up with people the consequences can be quite drastic.

A lot of Ryanair pilots have got away with it because they are under Republic of Ireland tax laws not UK tax laws.

For £350 per annum you wont get IR 35 compliancy advice, neither will get the legal cover you will need should you get audited.

[irish777]

I do understand the risk, but like many, had to take the risk. When I joined there was no other choice but to be self employed or limited company. I personally tried to mitigate the risk a little by doing genuine other work including working for and invoicing other customers.
Anyway I am glad to be out of their dodgy employment practice, sadly Ryanair aren't the only ones doing this.

[portsharbourflyer]

Irish777,

Apologies if I was a little abrupt, it seems you do understand the IR35 thing, it is a very grey area.

Did your accountants actually discuss the IR35 issue or were they not worried in that in the worst scenario as I mentioned the individual would bear the brunt not the accountants?

[Dan Winterland]

Depending on the country, but you may find that the company have already written off the cost of your training against their tax - even though you paid (probably too much) for it yourself.