I’m interested in hearing about people’s experience in buying an aircraft (and eventually selling it) through a UK limited company.
The reason to consider it is to defer the VAT. I’m assuming this is common practice as so many aircraft are sold “plus vat”.
Aircraft could be G, N or 2 reg.
Usage would be mainly me, but also could have a few other minor shareholder pilots.
Engines are likely to be on condition
I would have to set up a new company specifically to do this.
Any feedback and info appreciated!
If you register a company for VAT any purchases that are made as part of that company’s legitimate business are deductable and any sales will attract VAT.
So, if you intend to sell them on for a profit then I don’t see why not.
However, I would imagine that the market for aircraft that must have VAT added to their sales price would be very limited, especially ones where engines are on condition which would preclude training organisations from using them..
You need to be VERY careful with this,
Theoretically any use of a company owned aircraft could be considered a “benefit in kind” and the rules for taxation of BIK in the UK is punitive.
Take some advice from an accountant, you might find the only way around it is for the company to charge you a proper market rental per flying hour. However, unless the business is offering the aircraft to rent on a wider basis then HMRC might consider that the company is a sham and get you anyway. You would have to run proper accounts and submit VAT returns. The admin will be considerable.
And what are you trying to save? The cost of finance for the VAT element of an aircraft purchase is small at present, due to low interest rates.
I’m not saying don’t, but I am saying it’s far from straightforward.
As an aside you don’t have to be a limited company to be VAT registered. I am VAT registered as a sole trader (nothing to do with flying)..
This search digs out some reading 
@carlmeek posts merged into an existing thread. I suggest a read of this thread.
If one was to try to summarise it in 1 line: a Ltd Co ownership gives you no liability protection if you (the owner/operator) are flying it at the time, but exposes you to an HMRC attack on BIK (benefit in kind) unless the plane is used purely for business (which is not easy to prove, and HMRC are very aggressive in this area because they hate people who try to roll up expenses from what they see as a “hobby” – you have a PPL, haven’t you?? – into a business which might otherwise be paying [more] corporation tax).
In other countries (excl. tax havens e.g. the IOM which I am told has no BIK) the situation must be similar, because the concept of BIK must be universal, otherwise everybody would offset the cost of their hobbies against their taxes It just doesn’t get written about…
So IMHO there is no point in doing this if there is some private use. Just charge business trips to your main business, at full direct cost plus the pro-rated % of annual fixed costs. This is a standard method. For cars there are the standard mileage concessions.
Neil wrote:
Take some advice from an accountant, you might find the only way around it is for the company to charge you a proper market rental per flying hour. However, unless the business is offering the aircraft to rent on a wider basis then HMRC might consider that the company is a sham and get you anyway. You would have to run proper accounts and submit VAT returns. The admin will be considerable.
Let’s purely for arguments sake (as always ;-)) say you were to have a holding company. Within this holding company you had a few OpCo’s, let’s say a consulting business in one OpCo, a Real Estate business in the other, and the third operating company would be the Operations arm of the holding company which would lease vehicles to the holding company and to the operating companies. Let’s say, a car, a plane etc…
This would work without any issue in any of the western jurisdictions… You could on occasion rent that plane, or that car to yourself as well as a customer.
LFHNflightstudent wrote:
Let’s purely for arguments sake (as always ;-))
I think the bottom line is in most European countries it works. The advantage is that you buy the plane VAT free, you sell it VAT free but for all operating cost and the delta between purchase and sale you have to “fuel” this company by invoices you pay yourself. Those will be plus VAT. So in the very end when the plane is sold you end up paying VAT on what the aircraft actually cost you. All attemps to circumvent this by offsetting other profits with the cost of the airplane in the same company etc. is asking for trouble.
So the real gain is not paying VAT on the resale part of the aircraft value unless the following buyer would actually pay you more for a VAT inclusive plane. So my personal bottom line:
-The more expensive the plane the smaller the market for private VAT paid planes. Upwards from half a million it might be impossible to find a buyer who appreciates your VAT paid price. It does not make much sense. If everybody would pay the VAT we would all be off nearly the same but if you are the only one doing so you have a big problem at resale.
- The smaller your economic area, the more important to be able to sell VAT free worldwide. In the UK if you simply swallow the VAT as a private person you can actually only resell to another private person in the UK.
BUT this whole company thing creates quite a big chunk of admin cost and work so the value of the plane must be high enought to justify all that.
I agree with what Sebastian_G writes and have been doing so for some years. One thing to add would be that hourly rental invoices are generally plus VAT, but if the aircraft can fly commerce and one makes it available to an AOC holder, then invoices are 0% VAT. Fuel for such ops is also free of VAT and excise tax, which makes it about half the price.
The above posts are very country dependent, including the tax free fuel bit.
For example in the UK, and I think most other countries, you can register a VAT registered company, but you won’t be able to get the VAT back on the aircraft purchase unless you come up with a business plan. This varied over the years; 20 years ago it was a formality; today much less so.
Peter wrote:
The above posts are very country dependent, including the tax free fuel bit.
All that is required to get tax free fuel is a copy of your AOC certificate. I’ve been doing it all around Europe. Not country dependent at all.
Peter wrote:
but you won’t be able to get the VAT back on the aircraft purchase unless you come up with a business plan.
Before returning VAT on the aircraft purchase, the tax authority makes sure that you will be using the aircraft for business. The business is renting it out to an AOC holder (operator). It is not very complicated and absolutely legal.
