What would be the most methodical manner to carry this out, which would help you to save on VAT?
When you are a VAT-registered organization and you provide a set of tangible and intangible products, then you must charge VAT. You may only be exempted if your provided services can be said to be beyond the scope of taxation.VAT is applicable even when you purchase corporate gifts.
Therefore, these regulations are also applicable to the provisions you may distribute among your staff.Therefore, when you purchase a product and allow your staff to use it for their own convenience, or even give it away to them permanently, even then, this counts as a provision which is liable for VAT.For instance, a firm 'X Ltd' has innumerable employees. All of them require computers and internet routers. X Ltd purchases the computers and routers, giving them to their staff members.In this scenario, X Ltd is liable to retrieve the VAT that it has paid while purchasing the IT equipment.
Nevertheless, the distribution of products among staff is a provision. Thereby, X Ltd must be responsible for VAT upon the price of the IT products during the time at which it had distributed them to its employees.HMRC thinks this to be equal to the cost price. Thereby, VAT which X Ltd reclaimed, coheres to the price which it must record for.Here, the position of VAT is thereby, indifferent.Transfer which is later than usualMore importantly, as we have previously informed, if you allow a member of your staff to borrow your technical things and use them for their own purposes, then this is also a business provided that you are doing.
However, this can be more VAT-friendly than making a direct transfer.Point to be Noted: If your staff shall use your technical products for their own personal means, then it could be more methodical by means of VAT to first let them borrow it, and then give them the ownership. This would be a better option than to purchase the products and directly handing them over to them, permanently.Here is a calculation to help you comprehend the matter better.Say, X Ltd purchases IT equipment. The cost for this is £9,000. Then they reclaim the VAT, which amounts to £1,500.
Thereafter, X Ltd allows its staff members to borrow this equipment. Two years ahead, X Ltd transfers the ownership of these products to each staff member, respectively. its employees and after two years transfers ownership to them.These IT products are being used for personal purposes by the staff members, even though X Ltd owns them. Thereby, this counts as a business provides, and VAT is liable, even though it is for the personal usage of each staff member. Since personal use is known to be little (in comparison with business usage), Ltd X anticipates it to be around 10%.
After a period of two years, the cost of the technical items decreases in monetary value by 60%. It comes up to a Private £4,500 now.VAT that can be reclaimedVAT that has to be paidVAT retrieved for IT£1,500VAT on personal utility*£90VAT on handover **£600Summation£1,500£690* (Decrease of £4,500 X Personal Usage rate of 10% x VAT 20%).** Transfer amount £3,000 X VAT of 20%.
If you contrast the VAT calculation outlined in example 1, which involves the instant handover of the IT products to staff members, with Example 2, which involves the handover of the IT products to the staff members after their personal use of two years, you can notice that there is a better outcome in the second scenario.Therefore, when you purchase IT products for your staff (even if it is for your business), but allow them to use it for their personal purposes, it is a more sensible thing to do and save you a better amount with respect to VAT.
