help - commercial vehicle purchase
Discussion
Hi
I’m looking for advice on the best way to purchase a commercial vehicle for our company, I need to purchase a nearly new mini bus for our day nursery business and was wondering if anyone had any interesting views.
Which would be the most cost effective method, considering that as a nursery we cannot reclaim the vat !
Lease vehicle
Company buys vehicle
We as individuals buy vehicle and leases it back to the business
Any other suggestions ?
Cheers
I’m looking for advice on the best way to purchase a commercial vehicle for our company, I need to purchase a nearly new mini bus for our day nursery business and was wondering if anyone had any interesting views.
Which would be the most cost effective method, considering that as a nursery we cannot reclaim the vat !
Lease vehicle
Company buys vehicle
We as individuals buy vehicle and leases it back to the business
Any other suggestions ?
Cheers
ERIC!
As a practising accountant, for ethical reasons I do have to be careful about dishing out advice to individuals or businesses who already have accountants.
I won't go into the details of all the various aspects of accounting for leased, HP, owned vehicles etc (I've done that on PH plenty of times).
Just be aware, HM Revenue and Customns are planning in bringing in BIG changes to the tax treatment of leased assets after March.
I won't go into the details of all the various aspects of accounting for leased, HP, owned vehicles etc (I've done that on PH plenty of times).
Just be aware, HM Revenue and Customns are planning in bringing in BIG changes to the tax treatment of leased assets after March.
To understand the expected changes, you must know the current tax and accounting rules first.
Owned assets - business places assets in balance sheet and claims depreciation as a cost in its profit and loss account. For tax purposes depreciation is added back to the profit and tax Capital Allowances claimed instead.
Assets financed by ordinary loan or HP finance - same as for owned assets. Business also claims the loan interest or HP charges (NOT THE FULL REPAYMENTS) as an additional cost in the profit and loss account.
Assets financed by a Lease Purchase/Finance Lease - the accounts show the asset and finance in the exact same way as for assets on HP. However the tax authorities have a totally different approach. Because the leased asset remains the property of the leasing company, THEY are the people entitled to the Capital Allowances, not the business using the asset. As result, the leassee cannot claim the Capital Allowances too. Instead, the Revenue allow the depreciation charge in the accounts to remain as the tax relief claim. It is the only example in tax legislation where "depreciation" is allowable as a tax deductable expense.
Assets acquired under a Rental/Operating Lease - the asset is NOT capitalised in the Balance Sheet in the accounts. The only accounting entry is the charge of the regular rental amounts as a cost in the businesses Profit and Loss account.
The Revenue have announced that they plan to amend the tax treatment for Finance Lease type situations whereby they will be treated the same as HP financed assets. This is not finally decided yet - the leasing industry stands to loose billions in tax claims if the Capital Allowance claims are switched from them to the businesses actually operating the assests.
Owned assets - business places assets in balance sheet and claims depreciation as a cost in its profit and loss account. For tax purposes depreciation is added back to the profit and tax Capital Allowances claimed instead.
Assets financed by ordinary loan or HP finance - same as for owned assets. Business also claims the loan interest or HP charges (NOT THE FULL REPAYMENTS) as an additional cost in the profit and loss account.
Assets financed by a Lease Purchase/Finance Lease - the accounts show the asset and finance in the exact same way as for assets on HP. However the tax authorities have a totally different approach. Because the leased asset remains the property of the leasing company, THEY are the people entitled to the Capital Allowances, not the business using the asset. As result, the leassee cannot claim the Capital Allowances too. Instead, the Revenue allow the depreciation charge in the accounts to remain as the tax relief claim. It is the only example in tax legislation where "depreciation" is allowable as a tax deductable expense.
Assets acquired under a Rental/Operating Lease - the asset is NOT capitalised in the Balance Sheet in the accounts. The only accounting entry is the charge of the regular rental amounts as a cost in the businesses Profit and Loss account.
The Revenue have announced that they plan to amend the tax treatment for Finance Lease type situations whereby they will be treated the same as HP financed assets. This is not finally decided yet - the leasing industry stands to loose billions in tax claims if the Capital Allowance claims are switched from them to the businesses actually operating the assests.
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