Small Biz owner seeking advice about Business/Personal vehicle.

Room16

Hi,

Im currently looking into purchasing a vehicle for both business and personal use.
I am a sole trader and the vehicle will be used to travel to and from work as well as for conventions & other studios up and down the country a few times a year.

For personal use it would only be local or maybe the odd trip fishing for a week once a year.....not far, only 300m round trip.

Firstly the purchase, should i look at hired purchase through my barclays business account? Or should i get a business loan? even though i believe the finance option through barclays operates as a kind of loan.

Next, which would be the best way to put this through the business?

Thanks in advance for any replies.

olly300

You may be better posting this on the tax money saving forum as well as there are accountants, retired tax inspectors and book keepers who post on that board.

I would also give an estimation if possible of the number of business miles you expect to do a year and number of personal miles, and then give the type of vehicle you want when you post.

fengirl_2

In answer to yoour question, only you can do the sums as to the best way to purchase the vehicle based on your privtae/business miles. There is no formal procedure for 'putting the vehicle through the busness' - you just do it. You have a choice of two methods of including motor expenses in your accounts:
1. You include all the vehicle running costs -petrol, insurance, finance costs,servicing etc. Then, whe you do your self assessment, you add back on the form the private element (keep a record of private and business miles for, sat 3 mths to estimate the proportion of privtae miles). You would also then claim capital allowances of 20% f the value, less private use.
2. You include an adjustment in your accounts of 40p pm for the first 10,000 miles and 25p pm thereafer. You cannot then claim capital allwoances.
Once you choose one method, you hae to stick with it.

happyhappydays

I've asked a very similar question of my accountants on several occassions and the answer has always been that in the vast majority of cases it is more tax efficient to own the vehicle privately and then to pay your-self a mileage allowance as detailed in fengirl's post.

Horace

I met up with an accountant today who advised that as a sole trader I would be better off buying a car (sure it will be a loss at first) rather than claim mileage allowance because I could claim for petrol, tax, insurance, repairs etc.

If you are a limited company and therefore subject to corporation tax then it is better to say the vehicle is for personal use and just claim mileage allowance.

martindow

Horace wrote: »

I met up with an accountant today who advised that as a sole trader I would be better off buying a car (sure it will be a loss at first) rather than claim mileage allowance because I could claim for petrol, tax, insurance, repairs etc.

If you are a limited company and therefore subject to corporation tax then it is better to say the vehicle is for personal use and just claim mileage allowance.

You would only be able to claim a proportion as private use should not be charged to the business. I suspect that the Revenue would look rather closely if you claimed that only a very small percentage of your mileage was private

Room16

The situation is this, im not in any position to pay out the money myself for a vehicle, so..
Is there a way that I could purchase the car through the business bank account via a loan or lease purchase and then declare it as personal?
The do as was suggested and adjust the accounts by including the 40p per mile for business usage only?

fengirl_2

As I have said above, you and the business are one and the same. It does not matter where the money comes from to purchase the vehicle, if it is used in the business, you get tax relief for its running costs, or the mileage allowance. You dont do any 'declaring' - you just use it and enter the running costs in your books.

Room16

Thanks for the info

lisa76

Sorry to re-open this thread, but it's relevant to my question......

Registered as sole trader 6 April, but bought van in Jan 09. I would say that 75% of mileage is business.

Am I right in thinking the mileage relief option would be better? If this is the chosen route then petrol/repairs etc cannot be put through the business account can they?

fengirl_2

As I said in my first post it is really impossible to say which method is more benefical as it depends on the running costs of the vehicle and the number of miles. I would always keep records of all expenditure on the vehicle and all business miles and go for the most beneficial at the end of the year.

You can only choose one method or the other - either full cost of running the vehicle plus capital allowances, OR 40/25p per business mile. Once you have chosen one method you have to stick with it and you can only use the 40p method if you are not VAT registered.