Hire purchase sole trader

[Robert Elliott]

I have had a search around the site and there seems to have been a lot of similar questions asked but no clear answer. -

If I buy a van for £20,000 On hire purchase, how much can I claim for as annual investment allowance?

Do I use the £20k figure or monthly payments minus interest?

Just trying to decide on the best option for buying a new truck for the company.


Any help much appreciated!

 

[Scalloway]

Yes you still claim the full 20k as AIA if it's on finance. You can also claim the interest portion of monthly payments.

 

[Robert Elliott]

Thank you for your reply. That's good to know.
I assume this would then lower my taxable profit and mean i pay less tax?

Thanks again.

 

[Scalloway]

Yes

 

[Robert Elliott]

Great.
I currently do my own tax returns and have had my van stolen. Loocking to get something new and had never considered hire purchase.
Using the AIA option on hire purchase seems like a great option. I have had a bumper year too so it will also help bump up my expenses.

Thanks for your help.

 

[MyAccountantOnline]

Great.
I currently do my own tax returns and have had my van stolen. Loocking to get something new and had never considered hire purchase.
Using the AIA option on hire purchase seems like a great option. I have had a bumper year too so it will also help bump up my expenses.

Thanks for your help.

Don't forget you may have a balancing charge/allowance on the van which was stolen if you claimed capital allowances on it previously.

 

[Gordon - Commercial Finance]

Are you exclusively looking at HP or is leasing an option you have considered? Depending on you VAT status there can be pros an cons of each one.

 

[Robert Elliott]

I'm not vat registered. Also I would have liked to own the vehicle at the end.
Really struggling to weigh up whether it is worth the expense?
If I lease can I only claim back the monthly payments or the whole sum again?

 

[Gordon - Commercial Finance]

I'm not vat registered. Also I would have liked to own the vehicle at the end.
Really struggling to weigh up whether it is worth the expense?
If I lease can I only claim back the monthly payments or the whole sum again?

You can still own the asset at the end - with a finance lease there's just an asset transfer at residual value to be done, fairly simple.
The reason I suggested a lease, especially with you not being VAT registered, is that it means you don't have to pay the full VAT up front, when you won't be able to claim it back. It will cost the same as HP but the VAT is added on to each monthly rental and so it is spread out across the life of the agreement.
Just something to think about. HP is fine as well of course, but you just need to bear in mind the question of VAT as its a commercial vehicle you're looking to get.

If you want help getting something arranged - HP, lease, anything - send me a PM.