Car purchase for business - sole trader

[foofighting]

Hi, I am trying to find some info on cars please.

I need a big car to get me around with stock and to and from events I am appearing at. It needs to be 2nd hand under 2k - certainly cannot afford a new or a lease car. We are looking at sign writing on it too.

We bought one back in May for £1400 and it runs but has something wrong with it which we have been unable to fix to date. My husband thinks the Turbo has gone which will cost £600 to replace (plus labour). However, as we live in a rural area and my work is in the evenings I am too scared to drive it alone - I think that it's time to cut our losses and sell it and get something else.

I have read that I can put the car and maintenance though the business as long as I use it for some business use - I am just worried I have interpreted it incorrectly. If so, does this include putting the insurance and tax though as well (we have a policy allowing me to use it for business use)?

At the moment I am using our newish car but my husband is getting a tad annoyed at the scratches from driving through the lanes at night and from getting stock in and out - it is not really big enough anyway - and so an older car would also be better for this reason.

Can anyone please advise on:
1) How I put it through the books - say it costs £2,000, will tax be payable on this £2000 that I otherwise would have earned.
2) How I account for any personal use - I do have access to another main car - the one we bought (but is broken) has only been used 4-5 times in the last 9 months.
3) Confirm I have read the rules correctly on getting a car for business use.
4) Will this car be subject to the BIK tax like my husband gets on his company van. I am a sole trader.
5) Are the rules different if it was a commercial vehicle (double cab pick up but needs to have an enclosed back so stock does not get wet)? I need to get the kids in as they do come with me sometimes or I drop them off elsewhere on the way, it does need to hold 4 people so needs to be a car.

I've just got a pile of receipts for this car we have already bought so I have not put anything through the books as I was not sure of the rules but then found this forum.

Thank you for any help you can give me.

 

[smo]

You're a sole trader so its not the business buying the car, its you buying the car. You are the business - one and the same.

Take the money from your earnings, buy the car, tax, insure and run it and claim allowable expenses as per HMRC guidelines for the pure business travel. Make sure you keep a good record of business use, when where why and how far in case they decide to check.

On another point, there is no financial sense in "selling" a broken car for the sake a of possible £600 bill only to spend £2000 on buying an unknown quantity that may also need work. Fix the one you have.

 

[foofighting]

OK, thanks for the reply.

In regards to the 'not a business car' issue. We do not need a car for personal use as we already have a new one - this will be one that I can get sign written and use for getting my stock around in and going to shows.

Allowable expenses will not even cover the tax & insurance each month as new insurances means higher premium to start with - let alone also fixing the thing and paying for petrol so it'll cost me money, out of my pocket, because I need something for the business - yet you are saying that I cannot put those incurred expenses through. Allowable expenses will not cover the costs at the moment (maybe they will when business picks up but at this time, no, without the shows I cannot increase the business).

I have several friends who are self employed and have vans and they put all of their van running costs, petrol and expenses through - is this the difference? That they have vans and not van sized cars? My car has most of the seats removed and is bigger than their vans - should I be looking at getting a van instead then?

 

[foofighting]

Also to add (would not let me edit) £600 is the cost of the part - with the labour we are looking at 1k plus. And this may, or may not, fix the problem which is not really good enough for me tbh and I want a car I can drive, not one that is sitting on the drive.

A trader will have this spec car off us for a decent price and we'll lose around £200 on what we paid for it. Selling it on is the most viable option for us today. We do not have 1k to spend on something that does not guarantee it to be working at the end of it - especially as it seems I cannot claim anything back for the costs - we only bought the thing because someone else self employed at one of the shows told me I could use it for work and claim the expenses like tax & NI back. I've not done anything with the receipts so far and this is why I am asking - April is looming. We did not pay a huge amount for it so it's time to cut our losses and let it go IMO.

 

[BustersDogs]

My van goes through the books, all of it, everything, but I don't use it for personal use at all - you are talking about taking your kids out with you and dropping them off places, so personal use.

I have a very old second car which I count the mileage on, and it turns out I use it more for the business than personal use as well, so the 'business' is buying me a newer second car - at the moment I was paying myself 45p for every mile I drove it, but all the expenses came out of my personal account. Although as a sole trader like you, the business and I are one and the same I keep the money very separate, so to my mind it is the business buying the new car. I apparently have to have take off a percentage at the end of the year for what was personal use - so it looks as if I'll still be noting down mileage, just for personal use instead.

Here's my other thread if it helps.

http://www.ukbusinessforums.co.uk/forums/showthread.php?t=242391

 

[foofighting]

No I am not, I am talking about dropping them off with friends/family on the way to going to shows. I cannot take them with me because of what I do.

 

[foofighting]

I do have a business account BB, it was getting too messy in the early days - I have a lot of expenses with buying stock but I'd say at least 50% of the milage on our new car is business mileage. Every time I go out in it I end up going to the Post Office, Sorting Office or picking stuff up. I just tie going out into work hours.

I also need to add here that we are not like a 'normal' family. My son has disabilities so my kids do not go to clubs left right and centre like they do in other families, he only goes to 2 clubs - one is next to the post box I use on Saturday mornings if I have had Friday night sales, the other is on the way to the sorting office which is where I go with my 'too big for the post box' parcels.

On the VERY rare occasion my husband is not here and I have a show booked then I'll need to drop them with a friend or at my sisters. It has never happened but I need to know what I do IF it happens.

My business is what keeps me sane. I do not make huge amounts of money - I did before my son was born - but now it is more of a hobby that I want to keep running as he'll not need this level of care forever and I need to 'keep my hand in' so to speak and get a B&M shop when he is older. The years go so quick it'll not be long anyway.

I am being accused here of wanting to get a car that I use for myself which is my worry about getting the car. We have a new car for personal use and I am using that for the business now. Only my husband has said he would rather I did not.

I do not claim for this, that and the other like others do, just pro-rata for rent. I am too worried about getting in trouble for putting something through I am not supposed to, so I just do not. However, a car is a lot of money, it's not £5 or £10 a month and I want to make sure I follow the rules and put it through correctly.

I see what other sole traders do with their vans, going out for the night and stuff like that, even driving 100 miles to visit family in it, I want to make sure what I do is right.

 

[smo]

At no point did I say you needed a van or couldnt claim expenses. You can, but stick within the HMRC guidelines. There is no application of BIK because its not a "company car" as you are the company, you are not an employee or director getting benefits from using it, you also say there is no personal use anyway.

You seem to be missing the point about the cost of fixing a car than replacing it. Does the intented replacement have a warranty, does it need tyres, will it be taxed and with 12 months MOT, can you guarenteed that the turbo wont break within 1 week of you buying it - better the devil you know!!! 2K cars are full of pitfalls and its rarely better to chop and change at the end of the market.

To be prefectly frank it sounds better to be using the new car you have and claiming 45p for your mileage, it will work out far far better in the long run and more reliable too.

 

[MyAccountantOnline]

Hi

As a soletrader, if your turnover is below the VAT threshold, you can either claim -

1. 45p per mile for business trips in your car for the first 10,000 miles per annum and then 25p per mile thereafter, or

2. A percentage of all of your car costs ie fuel, repairs, road tax, insurance, servicing etc and what is called capital allowances based upon your business mileage. Eg if you travel 10,000 miles per annum in your car of which 2,000 is for business you'll claim 20% of your expenses and capital allowances.

You need to work out which gives you the highest claim and claim that.

Benefits in kind dont apply to you as a soletrader.

 

At the moment I am using our newish car but my husband is getting a tad annoyed at the scratches from driving through the lanes at night and from getting stock in and out - it is not really big enough anyway - and so an older car would also be better for this reason.


Thank you for any help you can give me.

Have you thought of getting a new husband instead?

Its only a car its meant to be used.

Earl