Claiming for vehicle

[arcon5]

I am looking to buy a new vehicle for use as Private Hire, which I will be paying for with a bank loan.

Now as this is a cost incurred because of the job i'm in could I claim the repayment amounts each week...

Thanks

[Williams lester]

You will be able to claim capital allowances against the vehicle and loan interest as expenses. The loan itself is not an expense of the business.

[MyAccountantOnline]

I am looking to buy a new vehicle for use as Private Hire, which I will be paying for with a bank loan.

Now as this is a cost incurred because of the job i'm in could I claim the repayment amounts each week...

Thanks

Just to clarify regardless of how/when you pay for the vehicle when you buy it you can claim an allowance, based on its total cost, against your tax called capital allowances as Dave mentions. Then as another claim you can set the interest part of the bank loan repayments against tax as well.

[CertaxBexley]

And if you happen to be Vat registered you can recover the vat element

[MJames]

Just to clarify the above for you, it sometimes helps to think of a loan as being an overdrawn bank account. So, if you had two business bank accounts, one in credit and one overdrawn and you transferred some money from the account with money in it, into the overdrawn account, you wouldn't think of that as a business expense, you're merely moving money around.

So the loan on the vehicle is much the same. When you make a payment, some of that payment goes toward paying off the original amount that you borrowed, while some of it pays the interest. Thus, the interest is something that you can claim as a business expense, but not the capital part of the payment.

Capital Allowances (please accept my apologies if I'm being patronising) are something that HMRC require that you use if you buy something which is going to last more than one year. It's all about matching costs that the business incurrs with the income that is generated.

If, for example, you buy a car for £10,000, then you will use that car in your business for a few years. So it wouldn't be right to claim an expenses of £10k in year one, and no expense in the following years when you're still using that car to help generate income. So HMRC's capital allowances set out the rules for how you go about spreading the expense claim over a few years, basically.

However, when it comes to business expenses, you obviously want to claim as many as you legally can so that you don't pay more tax than you're required to. With motor vehicles, you do have an alternative option.

You can, as we've already said, treat the vehicle as being owned by the business, and claim all of the actual expenses that you incurr (loan interest, fuel, insurance, repairs and servicing, capital allowances... etc).

You can also treat the vehicle as being owned by you personally. Then, the business is allowed by HMRC to pay you 40p per mile (for the first 10,000 miles) and 25p per mile thereafter (more if you carry a colleague as a passenger) as a reimbursement to you for letting the business use your car. Nine times out of ten, claiming a mileage allowance results in a higher tax saving than if you claim the actual costs.

Is your business ltd or sole trader?

[MyAccountantOnline]

If, for example, you buy a car for £10,000, then you will use that car in your business for a few years. So it wouldn't be right to claim an expenses of £10k in year one, and no expense in the following years when you're still using that car to help generate income. So HMRC's capital allowances set out the rules for how you go about spreading the expense claim over a few years, basically.


But bear in mind some vehicles do qualify for 100% tax relief in year one!:)

[MJames]

But bear in mind some vehicles do qualify for 100% tax relief in year one!:)

Yeah this is true. For any car with CO2 emissions of less than 110g/km, you can claim the whole purchase cost in one go and reduce your tax bill nicely in one go.

If you do claim the actual running costs though, you can't switch to claiming a mileage allowance later on - you must claim on the same basis for the life of the vehicle. It would be a shame to go for 'actual expenses' to take advantage of 100% first year allowances, only to realise that a mileage allowance would still have resulted in a higher tax saving over the life of the vehicle.

[Williams lester]

You can also treat the vehicle as being owned by you personally. Then, the business is allowed by HMRC to pay you 40p per mile (for the first 10,000 miles) and 25p per mile thereafter (more if you carry a colleague as a passenger) as a reimbursement to you for letting the business use your car. Nine times out of ten, claiming a mileage allowance results in a higher tax saving than if you claim the actual costs.


But you can't then claim the interest on the bank loan as an expense.

[MJames]

But you can't then claim the interest on the bank loan as an expense.

Please re-read my post. You'll see that I have said that you can either claim the actual expenses (and I specifically mentioned the interest) or youcan claim a mileage allowance.

[Williams lester]

Please re-read my post. You'll see that I have said that you can either claim the actual expenses (and I specifically mentioned the interest) or youcan claim a mileage allowance.

Whilst I am aware of what your post says, I don't think it was particularly clear from the post (to a non-accountant), that the loan interest would not be claimable. I was just reiterating this point for the benefit of the OP.

[MJames]

Well that's quite fair. I was perhaps a little too defensive there. Do accept my apologies.