Van Purchase Sole Trader

[snappyfish]

So I have to purchase a vehicle more suitable for my business. It will a van in the from of a T5 panel van or a kombi with seats in back. I am a sole trader not VAT registered using cash basis accounting.

So if I'm spending £10,000 to £15,000 on a van from personal savings outright I can of course move the money into my business account but whats the best way to go about this and also use it against tax expense?

Thanks

 

[Scalloway]

The money you put into the business is Capital Introduced.

A van you buy for your business is eligible for Capital Allowances. You can either claim the whole expense as Annual Investment Allowance (AIA) or claim 18% of the reducing balance as Writing Down Allowance (WDA).

You need to watch with vans with additional seats installed. HMRC may class it as a car, which means less advantageous tax allowances.

HMRC considers that this type of vehicle is a commercial vehicle for VAT purposes if it meets either of the following conditions:

• It has a payload of more than one tonne after the extra seats have been added.
• The dedicated load area (the load area that’s completely unaffected by the extra seats) is larger than the passenger area.

 

[Chris Ashdown]

You can get some great deals on secondhand vans or renting one, this would really help your cashflow in the early months, when you don't know the full effect of what your sales will be

 

[Adam93]

HMRC consider the Kombi with a back row of seats as a Car.

Therefore, due to the likely high emissions of more than 135g/km you will only be able to claim capital allowance of 8% per year.

The Tax Case in relation to Kombi vans is here - http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j10050/TC06082.pdf

You might want to look for a Vivaro

 

[snappyfish]

The money you put into the business is Capital Introduced.

A van you buy for your business is eligible for Capital Allowances. You can either claim the whole expense as Annual Investment Allowance (AIA) or claim 18% of the reducing balance as Writing Down Allowance (WDA).

You need to watch with vans with additional seats installed. HMRC may class it as a car, which means less advantageous tax allowances.

HMRC considers that this type of vehicle is a commercial vehicle for VAT purposes if it meets either of the following conditions:

• It has a payload of more than one tonne after the extra seats have been added.
• The dedicated load area (the load area that’s completely unaffected by the extra seats) is larger than the passenger area.

Thanks, my profits are likely to be much lower than the van purchase prices does this have any effect on the way I deal with this for tax?

You can get some great deals on secondhand vans or renting one, this would really help your cashflow in the early months, when you don't know the full effect of what your sales will be

Yes the van I'm looking to buy will be purchased outright with personal funds. I'm stuck wanting the van I've always wanted which is a T5 this helps me out for work and leisure. As it's not purely for business I'm spending my own savings so its just a little confusing on best way to do this. If it was purely a business van Id have a small panel van like a Citreon Berlingo, Ford Connect type thing.

 

[Scalloway]

Thanks, my profits are likely to be much lower than the van purchase prices does this have any effect on the way I deal with this for tax?

I presume you have no other income that a tax loss could be set against.

You can claim as much as you want of the purchase price against profits in the year of purchase as AIA. Then in subsequent years claim 18% of the reducing balance of the remainder as WDA.

 

[Adam93]

Careful - you may want to read the above tax case I have posted a link to above.

HMRC, in the past have treated Kombi vans as cars for the purposes of capital allowances, which means no AIA and probably WDA at 8% rather than 18%.

 

[snappyfish]

ok, so lets say I buy a panel type van no seats in back, for £10,000 I buy it outright with savings transfered from personal account to business account.

My business profits are less than £15,000 a year whats best way to handle this?

 

[STDFR33]

ok, so lets say I buy a panel type van no seats in back, for £10,000 I buy it outright with savings transfered from personal account to business account.

My business profits are less than £15,000 a year whats best way to handle this?

Possibly restrict the capital allowance claim and carry forward the rest.

But first, you need to establish whether this is car or a van for tax purposes.

 

[Chris Ashdown]

Forget the gloss of a new van and save your money for future needs

 

[snappyfish]

Forget the gloss of a new van and save your money for future needs

Yes I don't need a gloss new van look. But its not about what I have personally or don't have.

I'm just trying to work out if I need a kombi or panel van for business/pleasure and what it saves me in tax payment.

 

[snappyfish]

So I've decided to go for a small panel van 3 times the value I was going to spend.

If buying private, what proof do I need as to prove its value?

 

[Scalloway]

Presumably your bank account will show the money coming out. I would get the seller to sign a receipt which describes the vehicle and shows the date and name of the seller. I would take a photocopy of the registration document to attach to the receipt.

 

[snappyfish]

Presumably your bank account will show the money coming out. I would get the seller to sign a receipt which describes the vehicle and shows the date and name of the seller. I would take a photocopy of the registration document to attach to the receipt.

Thanks and yes, the money will come from bank account.

 

[Hahnbeck]

So I've decided to go for a small panel van 3 times the value I was going to spend.

So £30-45k? That is too much for a panel van. Don't use up so much of your capital on the van, you can put that money to much better use elsewhere.

 

[snappyfish]

So £30-45k? That is too much for a panel van. Don't use up so much of your capital on the van, you can put that money to much better use elsewhere.

Ahh sorry, I was meaning 3x less the original budget.

 

[Hahnbeck]

Ahh sorry, I was meaning 3x less the original budget.

OK one third of the original estimate is much better. If you're buying it outright you can use the AIA against profits as commenters have stated above. If you're financing it then the interest payments are tax deductible.

 

[snappyfish]

ok, so I've purchased a van outright with my own money. I transferred some funds from my savings account to my business back account as "owners equity" and of course I transferred the money to seller.

The price paid was £5995

Whats best way to record the purchase in wave accounting?

 

[Scalloway]

If you paid for the van from the account you use for Wave then it will be a bank payment debited to Motor Vehicles.

 

[snappyfish]

If you paid for the van from the account you use for Wave then it will be a bank payment debited to Motor Vehicles.

Yes it shows as uncategorised. But no expense category for vehicles?

So for the current tax year when tax return is due I can claim the full £5995 as expense?

 

[Scalloway]

For accounting purposes it needs to go on the balance sheet, to remind you that you own it.

For tax you can claim the whole cost as Annual Investment Allowance (AIA), not as a business expense.

 

[snappyfish]

Also, know I have this van which is for business use, I can claim 100% fuel expense from the date I purchased van? Where before I was using the 45p per mile rule.

 

[Scalloway]

If it is a vehicle that is new to you you can claim all costs for it from the date of purchase fuel, insurance, servicing etc.