VAT Question

[blunomore]

(Is there a dedicated VAT thread?)

In any event, my Q is this:

We recently bought a new car (an SUV) which is used mostly (about 80 or 90%) for work purposes.

Are we allowed to deduct the VAT portion of the purchase price when we submits our VAT return for the relevant period ?

Our auditor says no, this is allowed only in the case of a bakkie.

What is the reasoning behind this ?

 

[SilverNodashi]

For a workload bakkie, yes. But a 4-door bakkie no, so I suspect an SUV would fall under the same ruling.

 

[blunomore]

For a workload bakkie, yes. But a 4-door bakkie no, so I suspect an SUV would fall under the same ruling.

But my actual question is why is it allowed for a bakkie and not any other vehicle used for work purposes ?

 

[SilverNodashi]

That, I don't know. Maybe calls SARS and ask them? But I know we had the same issue with out double cab bakkie, which was used for business 100%. it was just more convenient to drive extra people than a single cab. But we couldn't claim the VAT cause it's seen as a luxury car and not work-only. i.e. it doesn't like like a bicycle with square wheels, but rather soft

 

[zamrg]

My understanding is that it's input denied as per the VAT Act S17(1)(c) as an SUV wouldn't meet the definition of a 'motor car' which "includes a motor car, station wagon, minibus, double cab light delivery vehicle and any other motor vehicle of a kind normally used on public roads, which has three or more wheels and is constructed or converted wholly or mainly for the carriage of passengers, but does not include
a) vehicles capable of accommodating only one person or suitable for carrying more than 16 persons, or
b) vehicles of an unladen mass of 3500 kilograms or more; or
c) caravans and ambulances
d) vehicles constructed for a special purpose other than the carriage of persons and having no accommodation for carrying persons other than such as is incidental to that purpose;
e) game viewing vehicles (other than sedans, station wagons, mini-buses or double cab light delivery vehicles) constructed or permanently converted for the carriage of seven or more passengers for game viewing in national parks, game reserves, sanctuaries or safari areas and used exclusively for that purpose, other than use which is merely incidental and subordinate to that use; or
f) vehicles constructed as or permanently converted into hearses for the transport of deceased persons and used exclusively for that purpose."

I think SoftDux-Rudi is right here in that an SUV is considered a 'single cab bakkie' which is denied this deduction, but as to the reasoning, *shrugs*.

I'm just a student; perhaps one of the resident accountants could give a proper explanation.

 

[blunomore]

My understanding is that it's input denied as per the VAT Act S17(1)(c) as an SUV wouldn't meet the definition of a 'motor car' which "includes a motor car, station wagon, minibus, double cab light delivery vehicle and any other motor vehicle of a kind normally used on public roads, which has three or more wheels and is constructed or converted wholly or mainly for the carriage of passengers, but does not include
a) vehicles capable of accommodating only one person or suitable for carrying more than 16 persons, or
b) vehicles of an unladen mass of 3500 kilograms or more; or
c) caravans and ambulances
d) vehicles constructed for a special purpose other than the carriage of persons and having no accommodation for carrying persons other than such as is incidental to that purpose;
e) game viewing vehicles (other than sedans, station wagons, mini-buses or double cab light delivery vehicles) constructed or permanently converted for the carriage of seven or more passengers for game viewing in national parks, game reserves, sanctuaries or safari areas and used exclusively for that purpose, other than use which is merely incidental and subordinate to that use; or
f) vehicles constructed as or permanently converted into hearses for the transport of deceased persons and used exclusively for that purpose."

I think SoftDux-Rudi is right here in that an SUV is considered a 'single cab bakkie' which is denied this deduction, but as to the reasoning, *shrugs*.

I'm just a student; perhaps one of the resident accountants could give a proper explanation.

The issue is not really about the fact that it is an SUV; my accountant led me to believe that ONLY a bakkie and NO OTHER VEHICLE can get this VAT input claimed back and that makes no sense to me whatsoever.

 

[zamrg]

ye, only bakkies and single cab delivery vehicles are exempt from this deduction and would be allowed the deduction, but again, I really don't know why, perhaps it's to do with the prevention of tax avoidance and abuse by companies who purchase personal vehicles under the company name to get the VAT input.

 

[etwylite]

Can I ask why your accountant didnt advise you to lease rather than buy? given your own business, the full lease is tax deductable as it is expensed. Anyway a vehicle which is designed to carry more than two persons is seen as a passenger conveyance and not a utilitarian goods conveyance vehicle as its primary purpose. Thus a Kingcab is vat deductable and double cab not...its the seating configuration that counts not doors. Remember anything you claim vat for when you sell it you have to charge vat too.

 

[etwylite]

also not just bakkies, but panel vans are also allowed..even those uno and tazz types that had the back seat removed and rear windows blanked

 

[blunomore]

ye, only bakkies and single cab delivery vehicles are exempt from this deduction and would be allowed the deduction, but again, I really don't know why, perhaps it's to do with the prevention of tax avoidance and abuse by companies who purchase personal vehicles under the company name to get the VAT input.

As if people would not buy a bakkie, pretend it's for work and then use it for personal purposes?!!

Can I ask why your accountant didnt advise you to lease rather than buy? given your own business, the full lease is tax deductable as it is expensed. Anyway a vehicle which is designed to carry more than two persons is seen as a passenger conveyance and not a utilitarian goods conveyance vehicle as its primary
purpose. Thus a Kingcab is vat deductable and double cab not...its the seating configuration that counts not doors. Remember anything you claim vat for when you sell it you have to charge vat too.

1. We did not ask our accountant's advice when we purchased our vehicle.

2. As mentioned, a part of it (albeit small) is for personal use.

 

[Mantis]

You're referring to the amount paid for the vehicle. What about fuel?
Do you write that up as well?

I know of many people who own businesses that "own" no vehicles. All the vehicles, sedans and luxury vehicles are on the business name and for ALL the fuel they get cash slips and submit these as well.

 

[RustyPrincess]

I think its because anything with more than 2 seats can be used to carry passengers, so therefore its not really "a working vehicle".

 

[undesign]

The issue is not really about the fact that it is an SUV; my accountant led me to believe that ONLY a bakkie and NO OTHER VEHICLE can get this VAT input claimed back and that makes no sense to me whatsoever.

Correct, input VAT claim only allowed for single cab bakkies only, as per the act. The reason is pretty obvious, it is a crude measure to ensure that not every Tom, Dick and Harry who has a VAT registered business claim VAT on their cars by claiming that it is used for business.

 

[blunomore]

Correct, input VAT claim only allowed for single cab bakkies only, as per the act. The reason is pretty obvious, it is a crude measure to ensure that not every Tom, Dick and Harry who has a VAT registered business claim VAT on their cars by claiming that it is used for business.

Crude being the operative word. Seems so easy to manipulate!

 

[undesign]

Crude being the operative word. Seems so easy to manipulate!

How is it easy to manipulate? You can only claim for a bakkie. So unless you want to drive "that thing" you can't claim.

 

[blunomore]

How is it easy to manipulate? You can only claim for a bakkie. So unless you want to drive "that thing" you can't claim.

People who are desperate to claim the VAT back will drive THAT THING in order to claim.

 

[HavocXphere]

The issue is not really about the fact that it is an SUV; my accountant led me to believe that ONLY a bakkie and NO OTHER VEHICLE can get this VAT input claimed back and that makes no sense to me whatsoever.

Your accountant is right, he just explained it in a very fuzzy way. They want to give you a "deduction" for delivery style vehicles mainly intended to move goods not people. But thats way to fuzzy a concept...the taxpayers demand guidelines & a cut-off point. Hence this 2 doors vs 4 door bakkie business. All other vehicles that are clearly delivery vehicles are fine too....panel van, flat beds etc

 

[blunomore]

Your accountant is right, he just explained it in a very fuzzy way. They want to give you a "deduction" for delivery style vehicles mainly intended to move goods not people. But thats way to fuzzy a concept...the taxpayers demand guidelines & a cut-off point. Hence this 2 doors vs 4 door bakkie business. All other vehicles that are clearly delivery vehicles are fine too....panel van, flat beds etc

Frankly it is rather ridiculous.

My better half drives to his clients for meetings / workshops / whatever on a daily basis. How on earth would he have been able to earn his income if not for this tool, i.e. the vehicle?

Yet he gets denied the opportunity to claim the VAT

 

[HavocXphere]

People who are desperate to claim the VAT back will drive THAT THING in order to claim.

Yes & people do in practice. The majority of the people will go for a real car though when faced with Driving a bakkie for 6 years vs R10k extra cost.

My better half drives to his clients for meetings / workshops / whatever on a daily basis. How on earth would he have been able to earn his income if not for this tool, i.e. the vehicle?

Thats not a delivery vehicle. Not even with a generous interpretation.

Frankly it is rather ridiculous

Its not quite as bad as you think. If input tax is denied, then in the calculation for the capital allowances you use an Incl VAT amount. So you get the same deduction either way...you just get screwed a bit on the cash flow & time value of money side if its a motor vehicle.

 

[blunomore]

Thats not a delivery vehicle. Not even with a generous interpretation.

Its not quite as bad as you think. If input tax is denied, then in the calculation for the capital allowances you use an Incl VAT amount. So you get the same deduction either way...you just get screwed a bit on the cash flow & time value of money side if its a motor vehicle.

Of course it is not a delivery vehicel. It is a vehicle used in the generation of business and THAT is my point. His VAT is linked to his BUSINESS but he is not allowed the deduction for a vehicle used by the same BUSINESS. Just does not seem fair, but yes, that is the law.