Van required for business. No idea where to start!
Discussion
Hi chaps,
Hope business is well for everybody. I am an AV installer and offer wall mounting/tv setup as well as IT services for the general public and small businesses.
I use a Mondeo Estate which is privately owned by myself and then charge my business £0.40 for every business mile. I pay for all running costs and fuel out of my own money.
I am registered self-employed.
I am requiring a van but have no idea on the best option of funding one.
I am considering registering as a ltd company and also if I do will consider becoming VAT registered.
I have read that tax implications are due to change in April? How?
Basically I have very little understanding and knowledge on this subject so need all help and adivce anybody is willing to give.
Thanks for taking time to read the post, hope you're able to help.
Hope business is well for everybody. I am an AV installer and offer wall mounting/tv setup as well as IT services for the general public and small businesses.
I use a Mondeo Estate which is privately owned by myself and then charge my business £0.40 for every business mile. I pay for all running costs and fuel out of my own money.
I am registered self-employed.
I am requiring a van but have no idea on the best option of funding one.
I am considering registering as a ltd company and also if I do will consider becoming VAT registered.
I have read that tax implications are due to change in April? How?
Basically I have very little understanding and knowledge on this subject so need all help and adivce anybody is willing to give.
Thanks for taking time to read the post, hope you're able to help.
The overall rules for the operation of Capital Allowance for small businesses are changing on 6 April. Essentially, small businesses will be able to write off up to £40,000 of their plant and amchinery costs incurred in each trading yer as a tax deductable cost. This new system will NOT apply to motor cars but WILL apply to vans.
Many of the details of these new arrangements have still to be revealed but that is the essential gist of it.
Plaese be aware that (under current rules at least) the tax treatment of a van (or any other qualifying asset for that matter) does vary depending on whether the asset is acquired by:
outright purchase
outright purchase using a bank loan
purchase through a HP
acquisition thrugh a Lease Hire/Finance Lease
operating throught a Rental Agreement/Operating Lease
I am pretty sure that the new rules will also take these different kinds of purchase/acquisition methods into account as well.
If you register for VAT you hould be able to recover the VAT on the cost of the vehicle except in the case of a Rental arrangement where you reclaim the VAT on the monthly rental payments.
Regarding setting up a limited company - be aware of ALL the implications of running your business this way. Whilst there may be some tax advantages in operating a compnay, they do make life a lot more complicated.
Discuss all the above matters with your accountant before making any final decisions.
Many of the details of these new arrangements have still to be revealed but that is the essential gist of it.
Plaese be aware that (under current rules at least) the tax treatment of a van (or any other qualifying asset for that matter) does vary depending on whether the asset is acquired by:
outright purchase
outright purchase using a bank loan
purchase through a HP
acquisition thrugh a Lease Hire/Finance Lease
operating throught a Rental Agreement/Operating Lease
I am pretty sure that the new rules will also take these different kinds of purchase/acquisition methods into account as well.
If you register for VAT you hould be able to recover the VAT on the cost of the vehicle except in the case of a Rental arrangement where you reclaim the VAT on the monthly rental payments.
Regarding setting up a limited company - be aware of ALL the implications of running your business this way. Whilst there may be some tax advantages in operating a compnay, they do make life a lot more complicated.
Discuss all the above matters with your accountant before making any final decisions.
Edited by Eric Mc on Thursday 8th November 08:04
I don't wish to make assumptions, but you are aware that after 10,000 miles you can only charge £0.25 p per mile?
You could become VAT registered without being a limited company. Being Limited gives you a little more legal protection as you can't (normally) be sued for everything you own if you screw up, you're only liable for the amount you put into the company.
Limited Company corporation tax is steadily increasing (again). It was reduced to 19% some years ago, but is 20% this year and is due to go up again next year. However, it's still less than paying income tax.
Be aware also that if you take on a rental agreement (Lease for instance), they often require ALL the VAT up front on commercial vehicles. Check with the supplier before you commit to anything.
I have a LTD CO, but use my own van (Bought for cash), and charge the mileage rates. For me it works out more tax friendly than having the Company own the vehicle and me being subject to P11D benefit charges.
I'd suggest you definitely speak to your accountant though as they'll be able to give you the best advice.
You could become VAT registered without being a limited company. Being Limited gives you a little more legal protection as you can't (normally) be sued for everything you own if you screw up, you're only liable for the amount you put into the company.
Limited Company corporation tax is steadily increasing (again). It was reduced to 19% some years ago, but is 20% this year and is due to go up again next year. However, it's still less than paying income tax.
Be aware also that if you take on a rental agreement (Lease for instance), they often require ALL the VAT up front on commercial vehicles. Check with the supplier before you commit to anything.
I have a LTD CO, but use my own van (Bought for cash), and charge the mileage rates. For me it works out more tax friendly than having the Company own the vehicle and me being subject to P11D benefit charges.
I'd suggest you definitely speak to your accountant though as they'll be able to give you the best advice.
The Benefits in Kind tax charge on a van is MUCH, MUCH less than those on a car. I cannot see any circumstances where the business should NOT own the van which is used in that business.
The BIK on the private use of a van is a flat £3,000 per annum - but the "private useage" definition is very generous and most incidental private journeys (including home to work) are now ignored and will not give rise to the BIK.
The BIK on the private use of a van is a flat £3,000 per annum - but the "private useage" definition is very generous and most incidental private journeys (including home to work) are now ignored and will not give rise to the BIK.
Eric Mc said:
The Benefits in Kind tax charge on a van is MUCH, MUCH less than those on a car. I cannot see any circumstances where the business should NOT own the van which is used in that business.
The BIK on the private use of a van is a flat £3,000 per annum - but the "private useage" definition is very generous and most incidental private journeys (including home to work) are now ignored and will not give rise to the BIK.
£3,000 BIK gets you a Company Car of around £16K (at 19% CO2 emissions). My van cost £6K or so 2nd hand. The price of a new van (equivalent) is only around £11K + VAT, so to me at least, the BIK is not too clever. I also make a gain on the 40p rate, as running costs of the vehicle are less than 20p all in. For us, at the moment, it's also a means of increasing income without increasing tax. It may change as the business grows.The BIK on the private use of a van is a flat £3,000 per annum - but the "private useage" definition is very generous and most incidental private journeys (including home to work) are now ignored and will not give rise to the BIK.
The other thing is, as far as I was aware (and I'd happily be proved wrong as it'd benefit me), it's down to the employer (or Company) to 'prove' the vehicle isn't being used for private use (apart from commuting). I reckon we could be creative in that respect though.
The new definitions of "private useage" are very generous and much less restrictive than the old rules. In the old rules, a home to work journey was deemed private and therefore triggered the BIK (which was only a flat £500 per annum). This blocked employees from taking vans home.
Now, the home to work journey is no longer considered to be private so no BIK will automatically arise. This is a major change.
Therefore, storing the van at home is now OK and will not trigger the BIK.
The tax authorities now allow "incidental private useage" but the Revenue have not clearly defined what they mean by this. I guess doing the weekly shop in the van or taking the kids to school every day in the van would NOT be considered "incidental" useage and would trigger the BIK. However, using the van a couple of times a year to take stuff to the local tip or to help a mate move house or to pick up a sofa from DFS are no longer considered "private journey" either and no BIK arises.
Now, the home to work journey is no longer considered to be private so no BIK will automatically arise. This is a major change.
Therefore, storing the van at home is now OK and will not trigger the BIK.
The tax authorities now allow "incidental private useage" but the Revenue have not clearly defined what they mean by this. I guess doing the weekly shop in the van or taking the kids to school every day in the van would NOT be considered "incidental" useage and would trigger the BIK. However, using the van a couple of times a year to take stuff to the local tip or to help a mate move house or to pick up a sofa from DFS are no longer considered "private journey" either and no BIK arises.
Edited by Eric Mc on Thursday 8th November 12:50
Eric Mc said:
The Benefits in Kind tax charge on a van is MUCH, MUCH less than those on a car. I cannot see any circumstances where the business should NOT own the van which is used in that business.
Eric I would like to know the tax difference between “owning” the van and “contract hire”.I understand there will be more tax benefits for owning, however the route I am going is contract hire including maintenance for 3 years. My reasons being that I don’t have to worry about unexpected maintenance costs or even tyres, and the cost is no different each month to financing the thing for purchasing…
Golfman - sorry for the delay.
Regarding Benefits in Kind, there are no differences between owned or leased vans. Once a van is supplied to an employee, the BIK rules are the same whether the van was purchased or leased.
The differences occur when you look at the type of tax relief available on the asset.
With an owned van, the business can claim Capital Allowances on the purchase price of the van. In the first year, the claim can be up to 50% of the cost of the van. In the second and subsequent years the claim is based on an annual 25% of the reduced brought forward balance of the van each year.
These rules also apply if the van is being purchased by means of a normal bank loan or a Hire Purchase agreement.
In these circumstances the finance cost i.e. loan interest/HP charges are also allowable as business costs.
With a leased van, there are two types of tax treatment, depending on whether the lease is a "Finance Lease" or an "Operating Lease".
With a Finance Lease, the business CANNOT claim Capital Allowances as they are being claimed by the Leasing Company. Instead, the business is allowed to claim the normal accounting Depreciation as a tax deductable cost. It is one of the few instances where the Depreciation charge is allowed for tax purposes.
The Leasing Charges (NOT the full repayments) are allowed as a tax deductable cost as well.
With an Operating Lease, the agreement is more in line with a "Rental" set up and therefore the full monthly repayments are fully allowable as they are the monthly "Rental" costs. Obviously, there will be no Depreciation as the asset will not have been capitalised in the first place. As in the case of the Finance Lease situation, the leasing company retains ownership of the asset and will be claiming Capital Allowances.
Next tax year there are radical changes to Capital Allowance regulations for small companies and in many circumstances, the cost of assets such as vans will be allowed IN FULL in the year they are purchased. Effectively this means a 100% write off in the first year of ownership. Of course, this will only apply to assets purchased outright or bought making use of loans or HPs. It will NOT apply to assets being acquired under any type of lease arrangement.
Regarding Benefits in Kind, there are no differences between owned or leased vans. Once a van is supplied to an employee, the BIK rules are the same whether the van was purchased or leased.
The differences occur when you look at the type of tax relief available on the asset.
With an owned van, the business can claim Capital Allowances on the purchase price of the van. In the first year, the claim can be up to 50% of the cost of the van. In the second and subsequent years the claim is based on an annual 25% of the reduced brought forward balance of the van each year.
These rules also apply if the van is being purchased by means of a normal bank loan or a Hire Purchase agreement.
In these circumstances the finance cost i.e. loan interest/HP charges are also allowable as business costs.
With a leased van, there are two types of tax treatment, depending on whether the lease is a "Finance Lease" or an "Operating Lease".
With a Finance Lease, the business CANNOT claim Capital Allowances as they are being claimed by the Leasing Company. Instead, the business is allowed to claim the normal accounting Depreciation as a tax deductable cost. It is one of the few instances where the Depreciation charge is allowed for tax purposes.
The Leasing Charges (NOT the full repayments) are allowed as a tax deductable cost as well.
With an Operating Lease, the agreement is more in line with a "Rental" set up and therefore the full monthly repayments are fully allowable as they are the monthly "Rental" costs. Obviously, there will be no Depreciation as the asset will not have been capitalised in the first place. As in the case of the Finance Lease situation, the leasing company retains ownership of the asset and will be claiming Capital Allowances.
Next tax year there are radical changes to Capital Allowance regulations for small companies and in many circumstances, the cost of assets such as vans will be allowed IN FULL in the year they are purchased. Effectively this means a 100% write off in the first year of ownership. Of course, this will only apply to assets purchased outright or bought making use of loans or HPs. It will NOT apply to assets being acquired under any type of lease arrangement.
Tesla said:
EDIT- Oh, any recommendations for vinyl wrappers?
These do a perfect job 
http://www.vanwrap.co.uk/
Plotloss said:
Nicely clarified as ever Eric.
So could one go and buy a van of any age and this would apply or is it only on new vans?
So could one go and buy a van of any age and this would apply or is it only on new vans?
Eric Mc said:
Any age.
That is correct.However, Contract Hire is nearly always only available on new vehicles due to the way the residuals have to be calculated for the end of term.
Some dealerships will do Contract Hire on a vehicle up to 6-12 months old but it is rare.
Edited by lazyitus on Tuesday 27th November 12:49
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