De-registration of VAT and Fixed Assets

DawnyDawny Settling In NicelyMAAT, AAT Licensed Accountant Posts: 60
I am in the process of pulling together a final VAT return for a client who has ceased trading and therefore de-registering for VAT.

The client has given me the asset register list with the net book value of assets before trading ceased, which totalled £22,549. Some of these assets were binned, should I revalue the asset to zero for the purpose of the return?

Also, the company had a car which was sold for less than the net book value in the books, should the VAT be calculated on the proceeds rather than the NBV?

Thank you in advance!

Comments

  • hong_bianhong_bian Registered Posts: 15
    If you are only doing VAT return for your client, you may not need to be concerned about writing off the fixed asset. There's no VAT on the NBV of £22,549 as the input VAT should have already been claimed when invoice was received. The output VAT on the disposal of car, shall be calculated on the proceeds, the net figure will be used to calculate profit or loss on the disposal.

    Hope this helps,
    Hong
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    I don't think you have to do anything with the car because the car would have had blocked input tax at the time it was purchased (ie. no input VAT has been claimed on it).

    Yes if the assets were binned they should no longer be on the fixed asset register anyway they should have been adjusted as a disposal?

    @hong_bian you may want to have a read of s7 of VAT Notice 700/11, the advice you have given above is incorrect.
  • DawnyDawny Settling In Nicely MAAT, AAT Licensed Accountant Posts: 60
    Thank you both for your help.

    The car was a pool car and wasn't available for any private use, so VAT was claimed.
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    When was the car sold? Wouldn't output VAT have been charged on the sales invoice anyway at the time of sale?
  • DawnyDawny Settling In Nicely MAAT, AAT Licensed Accountant Posts: 60
    The car was sold in the first quarter of the year, so before de-registering. The company was being run from it's US parent company and unfortunately they wouldn't of thought to add VAT to the sale price or issue an invoice.
  • hong_bianhong_bian Registered Posts: 15
    @Gem7321 Many thanks for pointing out the website of the notice. I will read it in details.

    Fixed assets shall remain on the fixed assets register all the time even after the item has been written off (I was told off by company accountant when I deleted items of which NBV is zero). However, in my eyes, it is the job for the company accountant as part of year end procedure not a MIP doing VAT return only.

    For the VAT on the proceeds of the car, If my answer is wrong, it must be the wording and my English :(

    here is what said on VAT Notice 700/64: motoring expenses

    Selling a car

    7.1 What must I do if my business sells a motor vehicle on which I have recovered VAT

    If you sell a car on which you recovered VAT (perhaps a driving school car or a pool car) then you must account for output tax on the full selling price. You must issue a tax invoice to a VAT registered buyer who requests one. Sales of these vehicles are not exempt and they cannot be sold under the second hand margin scheme.

    7.2 What if my business sells a car on which VAT was blocked

    If you sell a car where you were charged VAT but could not recover any of that VAT then you do not have to charge VAT on the sale and cannot issue a tax invoice. This is because the sale of the car will be exempt. Any input tax charged, which directly relates to the sale (for example VAT on auction fees) is exempt input tax. You will find further information about this in Notice 706 partial exemption.
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    Dawny said:

    The car was sold in the first quarter of the year, so before de-registering. The company was being run from it's US parent company and unfortunately they wouldn't of thought to add VAT to the sale price or issue an invoice.

    Then I think you would have to treat the sale price as the VAT inclusive price

  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    hong_bian said:


    Fixed assets shall remain on the fixed assets register all the time even after the item has been written off (I was told off by company accountant when I deleted items of which NBV is zero). However, in my eyes, it is the job for the company accountant as part of year end procedure not a MIP doing VAT return only.

    I agree, you would not delete an entry from the fixed asset register if the asset is still held even if it is fully depreciated. But if the asset has been sold of scrapped as the OP has explained I, the company accountant, would remove it from the register the following year.

    Your advice about claiming input VAT on the assets was incorrect. This was not the OPs question. The OPs question relates to deemed supplies in the context of cancelling VAT registration. Do have a read of VAT Notice 700/11.
  • DawnyDawny Settling In Nicely MAAT, AAT Licensed Accountant Posts: 60
    Thank you for your time and help on this!
  • hong_bianhong_bian Registered Posts: 15
    @Gem7321 Sorry to be a pain. I read VAT Notice 700/11 but could not understand how I was wrong about claiming input VAT on the purchase of the cars as Dawny's company has already done at the time when the new car was bought. The section 7 of the notice is about 'Business assets and stock on hand', the car has already been sold, I don't think it is relevant to the car. Please could you point out which section on the Notice I should pay more attention?

    The car was sold before the de-registration of VAT, since the output VAT on the sale of the car hasn't been declared on the invoice issued, it should be declared and paid to HMRC on the last VAT return. This will be the only thing I'd do if I was in Dawny's shoes acting as MIP for VAT return only for the client unless the client is happy to pay extra for the hours spent on the closing of Fixed Assets register.
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    hong_bian said:

    There's no VAT on the NBV of £22,549 as the input VAT should have already been claimed when invoice was received.
    Hong

    This is wrong and has nothing to do with the OPs question. The question was not about claiming input VAT on the NBV of the assets. The question relates to the deemed supply on cessation of the VAT registration which would create a VAT liability.

  • hong_bianhong_bian Registered Posts: 15
    Gem7321 I'd like to think you're accusing my English grammar rather than the accounting concept behind this argument is wrong.

    Thanks for pointing out that the input VAT was not part of Dawny's concerns. I'll try my best to improve my reading skills.
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    You can like to think whatever you like and blame your English grammar if that helps you, but if you read the notice you will see that there is a deemed supply on the NBV of the assets because the VAT liability on cessation will be excess of £1000, assuming that input VAT was claimed on the assets at the time of purchase and assuming they would be VATable supplies if sold in the normal course of business.
  • hong_bianhong_bian Registered Posts: 15
    Gem7321 point taken! I wasn't wrong with input VAT and that was what I meant with no VAT on the NBV, not no VAT Due on the NBV. You are on the different area of OUTPUT VAT due on the deemed supply of the goods, the company has on hand after the VAT de-registration.

    Dawny, I'm afraid you can't wait for the Company Accountant coming to close the Fixed Assets Register. You can definitely charge your hours to your client as you will have to know the NBV after revaluation to be able to calculate total OUTPUT VAT on Fixed Assets to be paid to HMRC on the last VAT return. Good Luck!
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    So even though you said 'there is no VAT on the NBV of £22,549 as the input VAT should have already been claimed' what you actually meant was 'there will be output VAT due on the NBV of £22,549 because there was input VAT claimed on the original purchase'?

    I'm leaving this thread now. Good luck @Dawny!
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