new van purchase

farenuf

Can anyone advise me of the most tax efficient method to purchase or other a new van for my business. I am a sole trader self employed engineer.I am not VAT registered and I am looking to purchase <other> ASAP.

Rolo_Tomasi

The amount of tax relief will probably be about the same over the life of the van however if you purchase (rather than lease) the van then you will (probably) get all of the tax relief in the first year using your Annual Investment Allowance. Of course this may change following the budget later this month as the new government will probably scrap the AIA.

golfwidow22

my husband is also thinking of buying a van for his work,he is a self employed joiner and was hoping to benefit from the AIA, we had no idea that the new government were going to do away with the allowance in the budget on the 22nd of june, my question is would this come into effect straight away or would it come into effect from the start of the next tax year. if it came into effect just after the budget, would a van purchased pre budget still qualify for 100% allowance? i know nothing is certain but would like to now what you think

ceeforcat

Sorry - golfwidow22 - no-one knows for certain if or when this allowance is being abolished. It is unlikely that it will be retrospective but THAT IS MY OPINION ONLY.

golfwidow22

thanks for the reply

Elaine_Wilson

Changes made to the First Year Allowance (abolished when the AIA was introduced) often took effect from budget day. I would think that if a change is made to AIA then that is the way they would do it. It does not cause the administrative headaches that might occur with other taxes.

I really hope that it is not abolished. Its introduction brought about a useful simplification of the capital allowances system. I know the Chancellor will not be reading this but I would suggest the maximum be reduced to £10,000 (or even £5,000 if things are really that bad). This would enable many small sole traders to write off their capital expenditure in one go, thereby simplifying the record keeping without costing the taxpayer much at all.

The only argument I can see against this concerns the interaction with Working Tax Credit where it has been possible in recent years for lowish earners to obtain 106% tax relief on their capital expenditure.

golfwidow22

i have just found the following on an accountancy firms website, and would be interested in what you think on here,from what i can gather from this it looks as if we bought the van pre election we would be ok?

"The corporation tax rate for small companies is set to reduce from 21% to 20%. So any company currently claiming capital allowances1 on investments in plant and machinery is likely to lose overall, if they are withdrawn.

Marios says, “If the £100,000 annual investment allowance is abolished, many small businesses will have to re-think their investment plans. In most instances, they will lose more than they gain from the 1% cut in the small companies’ rate and may not benefit from the cut in the main rate of corporation tax for many years – if ever.”

The Conservative party has long argued that the current regime of tax breaks (capital allowances) to encourage business investment in plant and machinery is too complex and distorts business investment.

The corporation tax cut and the likely capital allowance changes are expected to take effect from April 2011, although changes from 1 July this year cannot be ruled out. However, all is not lost. Marios says, “Depending how the allowances are removed there may be an advantage in bringing forward an expected investment or purchase. For example, buying that new machine now should mean that you can claim the annual investment allowance before it is abolished or claim other allowances at current rates before they are phased out or reduced.”

Marios concludes “These changes will hurt many small businesses already struggling in the recession. It is hard enough to find the funds to invest in and build your business as it is: cutting capital allowances effectively puts up the cost of such investments.”

John_Pierpoint

http://www.yorkshirepost.co.uk/country-columnists/Industry-Eye-Rural-communities-to.6388134.jp