new van - crew cab and tax implication

[Grace'sDad]

Things are going well right now. So well that I am looking for a bigger & better van. I have a wife and 2 children so I am looking for something with at least 4 seats. Lease hire - not purchase.

I would like the Merc Vito Sportline although I've not looked into prices yet!

Does anyone know if there are tax downsides to having a van obviously not designed for 100% business use? At the moment I understand (hopefully correctly) that I can claim back 100% of my fuel expenses on my van - would this still be the case? (Grumps?!)

Also - apart from the Vito, are there any other 4/6 seaters out there?
Pickups don't interest me - too thirsty!

Cheers!

 

[grumpygrouter]

Hi 'Dad. If you are operating as a sole trader and the van is your sole form of transport then the same rules as using a car would apply, i.e you would need to apportion the cost between business and private use.

 

[Grace'sDad]

Thanks Grumps. But what if I already have a car and the van is honestly and purely for business use?

 

[grumpygrouter]

Then normal fixed asset rules apply. You may need to justify to the IR why you would need 6 seats though if it is entirely for business use - only if they asked, of course.

 

[Grace'sDad]

Thanks - that's what I wanted to hear!

As far as I know there is nothing wrong with "avoiding" tax - only "evading"

I reckon I'd have to declare no more than 20% private use in that case, as we'd likely start to use the van a bit more, but still use the wife's car in the main.

 

[grumpygrouter]

I would say even that 20% may be a bit high if you have a car. I (used to)allocate 1 day a week as private use - 14.29%! before I started my tiling business, as unless it was Sunday, almost every trip "could" have a business conotation.

Also, just noticed form the original post, "lease hire" for accounting purposes is the same as a straight purchase or hire purchase. It is classed as a fixed asset purchase.

Contract hire or an "operating lease" is a different thing all together!

 

[Grace'sDad]

Also, just noticed form the original post, "lease hire" for accounting purposes is the same as a straight purchase or hire purchase. It is classed as a fixed asset purchase.

Contract hire or an "operating lease" is a different thing all together!

Thanks Grumps. So I had it wrong way round? Operating lease is in effect hiring the van over 2/3 years with no option to buy??? Lease hire is deposit down - 2/3 yrs payments and final option to purchase?

All very confusing.

It makes sense to me at the stage I am at though, to simply hire a van IF I can deduct the bulk of the payments from my profits. So I guess Operating Lease is really what I want.

 

[grumpygrouter]

Yes and operating lease is usually for 3 or 4 years. after that you (usually) have the option of continuing the lease but it will only cost something like the equivilant of 1 months rental per year. You never own the vehicle. More viable if you are VAT registered though otherwise the monthly outgoings are high and if you have to cease trading you are still liable for the balance of the lease!

 

[Grace'sDad]

Why more viable if VAT registered? What would you say is the best option for a sole trader, and why?

 

[grumpygrouter]

Because VAT is added to the monthly payments and if you are not VAT registered you can't claim them back. Ultimately it is really a cashflow issue but it obviously has an adverse effect on profits. Lower profits result in less tax but also has the drawback of giving you a lower income for mortgage/finance purposes. You would need to find the right balance of profit/taxation for your circumstances.

If it was me, I would go down the hire purchase or PCP route. The van is fully tax deductable but over a longer period (capital allowances system) and usually the payments are lower with more competative APRs. Also if you hit on hard times, you can sell the van and pay off the finance. You can't do that with contract hire or leasing.

 

[Grace'sDad]

Thanks grumpy - good advice as per usual. Somethings to think about now!

'Dad

 

[grumpygrouter]

Just checked my spelling. Last paragraph is more coherent now. lol.

 

[Grace'sDad]

I understand - few too many on a bank holiday week-end eh?! :8:

 

[grumpygrouter]

Sadly not yet, got to leave for the airport in 5 mins to pick up 'er indoors!

I may have a couple when I get back though.:yes:

 

[Grace'sDad]

You may need 'em if yours is like mine!!!:lol:

 

[devonmark]

Excellent replies, very informative, well done Grumps...Mark.

 

[grumpygrouter]

Excellent replies, very informative, well done Grumps...Mark.

Cheers Mark.