Tax on Insurance Payout for Written Off Van

Original Post:

Mr Gas Fires

Mr Gas Fires

Free Member
Dec 21, 2017
39
4
Bicester, Oxon.
  • #1
    Unfortunately I have had an accident in my work van and it is to be written off.
    I own the van outright and will be offered a cash settlement by the insurance company in due course.

    My question is, will I get taxed on the settlement? My accountant, who unfortunately hasn’t always given me the right advice and I don’t fully trust says that I will as I have already claimed the cost of it back as a purchase previously but then blinded me with gobbledegook that I couldn’t clearly understand. Other sources suggest that as it is compensations for an already owned asset it would not be taxed. I am also VAT registered.

    Can anyone clarify this in simple non-accountant speak please? Thanks in advance.
     
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    D

    DWS

    Free Member
    Oct 26, 2018
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  • #2
    Mr Gas Fires said:
    Unfortunately I have had an accident in my work van and it is to be written off.
    I own the van outright and will be offered a cash settlement by the insurance company in due course.

    My question is, will I get taxed on the settlement? My accountant, who unfortunately hasn’t always given me the right advice and I don’t fully trust says that I will as I have already claimed the cost of it back as a purchase previously but then blinded me with gobbledegook that I couldn’t clearly understand. Other sources suggest that as it is compensations for an already owned asset it would not be taxed. I am also VAT registered.

    Can anyone clarify this in simple non-accountant speak please? Thanks in advance.
    Click to expand...
    If you have already claimed the whole cost of the van then the insurance payout will be treated as disposal proceeds and are taxable.
     
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    Mr Gas Fires

    Mr Gas Fires

    Free Member
    Dec 21, 2017
    39
    4
    Bicester, Oxon.
  • #4
    Thanks for your replies.
    I was considering using the payout to settle other finance and then leasing a new van rather than buying a used one and risking the uncertainty that comes with that. My van was very well looked after and low mileage, I’m going to struggle to replicate it.
    However, with the massive recent increase in new van prices and hence high lease costs (which is what has made me keep this van for longer than usual) I am thinking it might be more tax efficient to buy something of similar value and take the risk rather than lease as I am in this position.
    Does this make the most sense from a tax perspective? The van was/is 6 years old, owned from new and will cost probably £12 - 16000 to replace like for like I would guess. Don't know if the insurance company will agree with this in their offer.
     
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    D

    DWS

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    Oct 26, 2018
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  • #5
    Mr Gas Fires said:
    Thanks for your replies.
    I was considering using the payout to settle other finance and then leasing a new van rather than buying a used one and risking the uncertainty that comes with that. My van was very well looked after and low mileage, I’m going to struggle to replicate it.
    However, with the massive recent increase in new van prices and hence high lease costs (which is what has made me keep this van for longer than usual) I am thinking it might be more tax efficient to buy something of similar value and take the risk rather than lease as I am in this position.
    Does this make the most sense from a tax perspective? The van was/is 6 years old, owned from new and will cost probably £12 - 16000 to replace like for like I would guess. Don't know if the insurance company will agree with this in their offer.
    Click to expand...
    I am not an insurance expert but I would have thought that once you receive the payout it’s up to you what you do with it.
    As far as making most sense tax wise then that’s something you need to discuss with your Accountant, but also why would you stay with someone who gives the wrong advice and you don’t trust, seems crazy!
     
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    Daybooks

    Daybooks

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    • Sep 29, 2017
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  • #6
    You buy van for £1,000 you get tax relief on £1,000.

    You dispose of van for £750 via insurance payout.

    If nothing else you’ve received relief for £1,000 which has now only cost a net £250. HMRC not like. HMRC want the relief given on the excess over the £250 back.
     
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    Mr Gas Fires

    Mr Gas Fires

    Free Member
    Dec 21, 2017
    39
    4
    Bicester, Oxon.
  • #7
    DWS said:
    I am not an insurance expert but I would have thought that once you receive the payout it’s up to you what you do with it.
    As far as making most sense tax wise then that’s something you need to discuss with your Accountant, but also why would you stay with someone who gives the wrong advice and you don’t trust, seems crazy!
    Click to expand...
    I don’t ‘stay’ with them, I have recently started with them and some issues have come to light. I won’t be staying.
     
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    Mr Gas Fires

    Mr Gas Fires

    Free Member
    Dec 21, 2017
    39
    4
    Bicester, Oxon.
  • #9
    Daybooks said:
    You buy van for £1,000 you get tax relief on £1,000.

    You dispose of van for £750 via insurance payout.

    If nothing else you’ve received relief for £1,000 which has now only cost a net £250. HMRC not like. HMRC want the relief given on the excess over the £250 back.
    Click to expand...
    That makes sense, I understand now. It might seem silly but they have a way of explains things so that they make no sense whatsoever to the non-accountant! Thank you 👍
     
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    JEREMY HAWKE

    JEREMY HAWKE

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    Mar 4, 2008
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  • #11
    As the above its basically as sale
    It may have been the best thing to happen a 6 year old van is still a modern van but with all the problems of an out of warranty modern van
    You wont regret leasing/renting
     
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    Mr Gas Fires

    Mr Gas Fires

    Free Member
    Dec 21, 2017
    39
    4
    Bicester, Oxon.
  • #12
    UKSBD said:
    Or to put it another way, you sold a product to
    Click to expand...

    JEREMY HAWKE said:
    As the above its basically as sale
    It may have been the best thing to happen a 6 year old van is still a modern van but with all the problems of an out of warranty modern van
    You wont regret leasing/renting
    Click to expand...
    Indeed, thanks. Decision made.
     
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    MyAccountantOnline

    MyAccountantOnline

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    Sep 24, 2008
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  • #13
    Mr Gas Fires said:
    Unfortunately I have had an accident in my work van and it is to be written off.
    I own the van outright and will be offered a cash settlement by the insurance company in due course.

    My question is, will I get taxed on the settlement? My accountant, who unfortunately hasn’t always given me the right advice and I don’t fully trust says that I will as I have already claimed the cost of it back as a purchase previously but then blinded me with gobbledegook that I couldn’t clearly understand. Other sources suggest that as it is compensations for an already owned asset it would not be taxed. I am also VAT registered.

    Can anyone clarify this in simple non-accountant speak please? Thanks in advance.
    Click to expand...

    My question is, will I get taxed on the settlement?

    Yes but how and what will be due will depend on what tax relief you claimed on the van.

    Are you a sole trader and if so do you use the cash basis for accounting and tax, or are you trading via a limited company?
     
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    Lisa Thomas

    Lisa Thomas

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  • #14
    Mr Gas Fires said:
    That makes sense, I understand now. It might seem silly but they have a way of explains things so that they make no sense whatsoever to the non-accountant! Thank you 👍
    Click to expand...
    Ask them to explain it in layman's terms. Happy to recommend a new accountant if you want to move, and don't find one on here.
     
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