But could your race car, actually be yours or a company car, and therefore all running costs to be tax deductible ?
steve
Just wondering if anyone has any experience in this area,
I would like to get back into rallying in the future, it is quite an expensive hobby, so I was wondering the legalities about setting up a Ltd
company, say ABC Racing ltd. Can I register for VAT, claim back the vat on the parts to build the car, Have ABC Racing pay teh entry fees any get
it's income from personal sponsorship?
Sounds dodgy, but is it possible?
I think you could do it but I would speak to an accountant to see whether it would be worth it .
If you are claiming back vat the HMRC would expect you to be charging vat and making money. If you never posted a profit or showed money coming in to
the business they would probably come down on you like a rusty old rally car falling from the sky.
May be possible to fiddle it so it works but tread carefully
Isn't it a legal requirement for a LTD company to run at a profit, or at least not lose money?
I've recently returned to a contracting role and have my own limited company and the similar idea came to me too. I briefly ran it past my
accountants and it is possible. One perk is that I can use the company to fund "training" (driver tuition, ARDS course etc etc) and the race
car could simply be a company asset bought either with company funds or part donations. The other alternative is that the company then sponsors you
and you stick a great big logo over the car, which in turn reduces the tax bill for the company.
I think VAT registration may be possible but again, speak to an accountant. Income from sponsorship is fine whether that's external or you as the
director of the company, just check what the tax complications are of such things.
I don't think its dodgy, all race teams are set up as a business anyway. Just depends if they are funded by other operations within the
business/group or simply there for racing. Personally if you already have a limited company which has an income from elsewhere, I think it would work
well using retained profits etc. However, setting it up solely for VAT benefits I think would leave you worse off.
As above I feel an accountant would be best placed to guide you with the process, including legalities and best practice etc.
My boss has a number of "dormant" Ltd companies, some with funds in them. My observation is it seems to cause him a lot of work around tax
returns etc. I would make certain of the benefits vs. the effort before starting.
I've got a memory of someone looking into this a number of years ago (this is from memory so could be complete rubbish).
who will be dirving the car?
If its someone else then this has potential....
If its you, its a benefit of being with the company and you'll pay personal tax on it all. Its not worth it.
Mike summed it up, if your "sponsoring" yourself which in essence is what you are doing tax man would be most unhappy, if it was that easy (and legal) everyone would be doing it.
"I know nothing" in the words of Manuel
But could your race car, actually be yours or a company car, and therefore all running costs to be tax deductible ?
steve
What do you do for work?
If self employed, Any clients that would be willing to sponsor you, you could then 'discount' their fees.
Or would you boss be willing to sponsor you? You might need to take a pay cut to balance out the difference.
quote:
Originally posted by MikeR
I've got a memory of someone looking into this a number of years ago (this is from memory so could be complete rubbish).
who will be dirving the car?
If its someone else then this has potential....
If its you, its a benefit of being with the company and you'll pay personal tax on it all. Its not worth it.
Your plan might have legs but you would need to seek proper advice. I was at a Business Finance For Non-accountants course a couple of months ago and
the guy teaching it (Who is an accomplished accountant) said there is no law preventing you from deliberately running a business at a loss and if its
a limited company there is no law against you paying your self a salary that effectively crashes the company, provided you pay income tax.
This came up because someone was asking something about Trump having had his companies go bankrupt a few times and he said he knew of examples of
people deliberately running companies that made no profit but paid themselves big salaries using investors money.
If you form a LTD company you will also protect yourself financially from it all going Pete tong as you won't personally be liable for company
debts under normal conditions.
Before asking an accountant have a look on Direct.Gov or what ever its called these days as it has lots of information about this kind of thing.
There is a fairly basic test here that the revenue applies - is the company's main purpose to try and trade and make money? If yes then it is a
legitimate business, if no then it is a vehicle to avoid/evade tax. You'd have a very hard job as a one man band race team to persuade them that
you are running a legitimate business.
Big race teams where (generally) the owner isn't the driver, there is genuine sponsorship, full time employees, premises etc is a far easier case
to make.
[Edited on 7/12/16 by GreigM]
I asked an accountant at work (we were talking about F1 so thought I'd see what he thought) and he reckoned you'd be okay as long as you don't pay yourself anything or take out any money.
quote:
Originally posted by morcus
I asked an accountant at work (we were talking about F1 so thought I'd see what he thought) and he reckoned you'd be okay as long as you don't pay yourself anything or take out any money.