Business Lease - Commercial Vehicle (Pick Up)
Discussion
Hi guys,
Looking at leasing a Toyota Hilux (double cab) for 3 years through my (VAT registered) Ltd company.
The vehicle will be used by both my wife and I, who are employed by the company and genuinely for company use - albeit with a small amount of personal use (shopping on route home, picking daughter up from school, etc)
I’m wondering what the tax implications of this is, being a ‘commercial vehicle’ but actually a 5 seat car really (not a Van basically).
My understanding, which I can’t see to be correct, is that if the cost were £300 + VAT per month, I’d claim 50% of the VAT back (?) making the real cost per month £330 incl VAT per month - so £3,960 per year - if I reduce my dividend drawing by this amount per year, and therefore a significant tax reduction, it does make the lease deal worth considering.
I feel I’m missing something obvious here - you may have guessed, I am not an accounts man!
If anyone is able to shed some light on where I actually stand that would be really appreciated..
Many thanks,
Daniel
Looking at leasing a Toyota Hilux (double cab) for 3 years through my (VAT registered) Ltd company.
The vehicle will be used by both my wife and I, who are employed by the company and genuinely for company use - albeit with a small amount of personal use (shopping on route home, picking daughter up from school, etc)
I’m wondering what the tax implications of this is, being a ‘commercial vehicle’ but actually a 5 seat car really (not a Van basically).
My understanding, which I can’t see to be correct, is that if the cost were £300 + VAT per month, I’d claim 50% of the VAT back (?) making the real cost per month £330 incl VAT per month - so £3,960 per year - if I reduce my dividend drawing by this amount per year, and therefore a significant tax reduction, it does make the lease deal worth considering.
I feel I’m missing something obvious here - you may have guessed, I am not an accounts man!
If anyone is able to shed some light on where I actually stand that would be really appreciated..
Many thanks,
Daniel
One thing you have missed is the BIK for using a company vehicle as personal transport. You would need to check on this for pickups, not sure the applicable rate. A lot of people are going the route of buying the vehicle personally and claiming back the applicable ppm from the company.
C350Akra said:
One thing you have missed is the BIK for using a company vehicle as personal transport. You would need to check on this for pickups, not sure the applicable rate. A lot of people are going the route of buying the vehicle personally and claiming back the applicable ppm from the company.
It’s very favourable for pickups. Classed as commercial vehicles (well most are)The important thing is to ensure that the vehicle is of a type that HMRC classify as a "Commercial Vehicle". If it does, then the Benefit in Kind tax rules will be a lot less onerous than for a "Motor Car".
Have you looked at the alternatives to leasing? Purchasing rather than leasing can give very good Capital Allowances for Commercial Vehicles - such as 100% write off against the business profits in the year of acquisition.
But it MUST be a Commercial Vehicle.
Have you looked at the alternatives to leasing? Purchasing rather than leasing can give very good Capital Allowances for Commercial Vehicles - such as 100% write off against the business profits in the year of acquisition.
But it MUST be a Commercial Vehicle.
With the lease above (I assume thats contract hire), that 12k over the term, with I assume a restricted mileage.
An alternative you should consider is the company purchase the truck.
You company can write down/depreciate the value of the car over the lifetime (say 4 years), so in simple terms the cost of the truck would be written off against company profits, you may even be able to claim this in one year under the annual investment allowance!
Theres also the matter of the VAT your company can reclaim, (or roll into the deposit)..which would be 4-6k.
Its worth a chat through with you accountant, before you sign any lease forms, also Toyota are doing some finance packages from 0% at the moment..
An alternative you should consider is the company purchase the truck.
You company can write down/depreciate the value of the car over the lifetime (say 4 years), so in simple terms the cost of the truck would be written off against company profits, you may even be able to claim this in one year under the annual investment allowance!
Theres also the matter of the VAT your company can reclaim, (or roll into the deposit)..which would be 4-6k.
Its worth a chat through with you accountant, before you sign any lease forms, also Toyota are doing some finance packages from 0% at the moment..
the use that you describe will result in BiK. If it exclusively for work then no BiK
As an aside the new Toyota looks very impressive but the 2021 updated Navara is much better value to buy or lease right now. I have just bought a new auto one at just over £23k plus vat. It has a 5 year warranty as well. I only do 7/8k a year and felt it was cheaper to own that lease. If you lease you have nothing to show for it at the end.
As an aside the new Toyota looks very impressive but the 2021 updated Navara is much better value to buy or lease right now. I have just bought a new auto one at just over £23k plus vat. It has a 5 year warranty as well. I only do 7/8k a year and felt it was cheaper to own that lease. If you lease you have nothing to show for it at the end.
Deesee said:
With the lease above (I assume thats contract hire), that 12k over the term, with I assume a restricted mileage.
An alternative you should consider is the company purchase the truck.
You company can write down/depreciate the value of the car over the lifetime (say 4 years), so in simple terms the cost of the truck would be written off against company profits, you may even be able to claim this in one year under the annual investment allowance!
Theres also the matter of the VAT your company can reclaim, (or roll into the deposit)..which would be 4-6k.
Its worth a chat through with you accountant, before you sign any lease forms, also Toyota are doing some finance packages from 0% at the moment..
Depreciation is of no use to a business when tax is being calculated. HMRC does not allow depreciation (in most cases - there are some exceptions) as an allowable taxable deduction. This is because they have an alternative system called Capital Allowances (as mentioned in my previous post).An alternative you should consider is the company purchase the truck.
You company can write down/depreciate the value of the car over the lifetime (say 4 years), so in simple terms the cost of the truck would be written off against company profits, you may even be able to claim this in one year under the annual investment allowance!
Theres also the matter of the VAT your company can reclaim, (or roll into the deposit)..which would be 4-6k.
Its worth a chat through with you accountant, before you sign any lease forms, also Toyota are doing some finance packages from 0% at the moment..
There is a very generous Capital Allowance available at the moment called the Annual Investment Allowance (AIA) which can be up to 100% on the purchase price of the asset. It applies to Plant and Machinery (which includes Commercial Vehicles) but NOT Motor Cars.
Therefore, any business thinking of acquiring a Commercial Vehicle should carefully consider whether it would like to avail of the opportunity to claim back 100% of the cost of the vehicle against their business profits.
Eric Mc said:
Deesee said:
With the lease above (I assume thats contract hire), that 12k over the term, with I assume a restricted mileage.
An alternative you should consider is the company purchase the truck.
You company can write down/depreciate the value of the car over the lifetime (say 4 years), so in simple terms the cost of the truck would be written off against company profits, you may even be able to claim this in one year under the annual investment allowance!
Theres also the matter of the VAT your company can reclaim, (or roll into the deposit)..which would be 4-6k.
Its worth a chat through with you accountant, before you sign any lease forms, also Toyota are doing some finance packages from 0% at the moment..
Depreciation is of no use to a business when tax is being calculated. HMRC does not allow depreciation (in most cases - there are some exceptions) as an allowable taxable deduction. This is because they have an alternative system called Capital Allowances (as mentioned in my previous post).An alternative you should consider is the company purchase the truck.
You company can write down/depreciate the value of the car over the lifetime (say 4 years), so in simple terms the cost of the truck would be written off against company profits, you may even be able to claim this in one year under the annual investment allowance!
Theres also the matter of the VAT your company can reclaim, (or roll into the deposit)..which would be 4-6k.
Its worth a chat through with you accountant, before you sign any lease forms, also Toyota are doing some finance packages from 0% at the moment..
There is a very generous Capital Allowance available at the moment called the Annual Investment Allowance (AIA) which can be up to 100% on the purchase price of the asset. It applies to Plant and Machinery (which includes Commercial Vehicles) but NOT Motor Cars.
Therefore, any business thinking of acquiring a Commercial Vehicle should carefully consider whether it would like to avail of the opportunity to claim back 100% of the cost of the vehicle against their business profits.
If you are financing IMO, it can be prudent to write down the value of the assets year by year, it could also be advantageous as you mention to claim 100%.
There is also the matter of 'personal' use as well as what BIK looks like now, and if HMRC decide to amend this in the future.
Terms matter because using the wrong term would amount to wrong advice.
Depreciation is purely an accounting tool and it is very useful for planning expected life of an asset in a business - making decisions as to when to retire an asset or sell it, for example.
However, it is not a "tax" tool because of the special rules HMRC applies to writing off assets.
As for outguessing HMRC's future rules on Capital Allowances and Benefits in Kind, that is always a problem. Accountants can only ever give advice based on what the current rules are. Every Chancellor's Budget has the risk that all your careful "five year future tax planning" advice can become completely obsolete because HMRC has changed the rules. This is particularly an issue when dealing with decisions that will affect a business for a number of years, such as what type of asset to acquire, whether to buy it outright, whether to borrow to buy it or whether to lease it.
Vehicles are especially difficult to plan for because the rules on how they are treated for tax has gone through many permutations over the years.
Depreciation is purely an accounting tool and it is very useful for planning expected life of an asset in a business - making decisions as to when to retire an asset or sell it, for example.
However, it is not a "tax" tool because of the special rules HMRC applies to writing off assets.
As for outguessing HMRC's future rules on Capital Allowances and Benefits in Kind, that is always a problem. Accountants can only ever give advice based on what the current rules are. Every Chancellor's Budget has the risk that all your careful "five year future tax planning" advice can become completely obsolete because HMRC has changed the rules. This is particularly an issue when dealing with decisions that will affect a business for a number of years, such as what type of asset to acquire, whether to buy it outright, whether to borrow to buy it or whether to lease it.
Vehicles are especially difficult to plan for because the rules on how they are treated for tax has gone through many permutations over the years.
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