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Flat rate VAT on capital assets that are used in film production and rented out

Capital Assets query for film production

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We are a small Film Production company buying equipment for our own productions and that of other clients.

According to the Flat Rate rules we can claim on assets above 2K.

We have been doing this for a number of years. We also pay 13% on our turnover in the category of film production.

The problem is I've found a note saying you can't claim for capital expenses that you intend to hire out.

This causes me a lot of issues as we both use our equipment and rent it to clients.

It doesn't make any sense because if we'd chose not to rent it out  the HMRC would have much less revenue whilst at the same time according to their notes legitimising the VAT reclaim!

We are having a VAT compliancy check and this has got me concerned.

Any thoughts would be appreciated.

Replies (4)

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By hallj999
Jan 7th 2016 20:12

Hi,

I have a client in a similar situation, what was the outcome?

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By rone
Jan 12th 2016 10:26

I think the conclusion was if you purchased the equipment with the sole intention of renting then you can't claim the VAT. But if like us your purchased the equipment for reasons other than renting initially - then you can claim initially.

Further down the line we changed due to the market to renting equipment.

So it's a question of timing and how your business evolves over time.

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By rone
Jan 12th 2016 10:28

Although it has to be said I'm still not sure with regard to dual use of the Capital items.

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Replying to rone:
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By hallj999
Jan 17th 2016 21:12

Thanks for your response, so in short HMRC were happy with your treatment then? To be honest we are struggling to get a straight answer on this , even from HMRC themselves so any further info you have on this topic or the outcome of the VAT audit would be greatly appreciated.

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