Can this be done?

whitts

Hi

I am way out of my depth on this as I have been employed for the past 27 years and know nothing about tax. So any advise would be really appreciated.

I have been offered a taxi plate for a very good price, i have worked out that with the weekly rent i would have it paid back in 3 years however i have no idea about the tax implications. What i might like to do is buy it for my 15 year old son and he can then have an investment for the future and can make an earning from it. So is it possible or am i dreaming!

many thanks

jimmo

Just to ensure we are talking about the same thing you are considering buying an asset with borrowed money, renting it out to others and within 3 years there will be sufficient (taxable) profits to enable you to repay the amount borrowed money.
First the easy bit, if you buy the asset for yourself you will be liable to tax on the profit.
In very simplistic terms, your taxable profit will be rental income less interest paid on the borrowed money.
If you put the asset into your minor son's name you will be caught by the "Settlements Legislation" and the taxable profits will be deemed to be yours and you will still be liable to tax on it until he is 18.
http://www.hmrc.gov.uk/manuals/tsemmanual/TSEM4015.htm
It will take someone cleverer than me to tell you whether the interest payable on the borrowed money will still be allowable in such circumstances so your tax bill could be higher.
It might be a sound idea to buy the asset in your own name and pay tax on the profits, at least until your son is 18.
Then you could consider gifting the asset to him. If you did that you would potentially be liable to Capital Gains Tax on the difference between the open market value of the asset at the date of the gift and the amount you paid for it.
Current legislation allows you to make Capital Gains of £10,600 in a year tax free. Would that cover it?
Quite frankly, that is just scratching at the surface of tax matters and you have a lot to learn pretty quickly if you buy the asset but if it is a golden opportunity then who knows?.

whitts

Thanks for the information.

It sounds as if it would be better to buy it for myself at the moment, if the rent from the plate covers the loan each month does that mean i will not have to pay tax on it?

thanks again

taxsaver

No... because the loan payments will also include repayment of the capital and it is only the INTEREST that you are able to set-off against earnings before arriving at the taxable profit from your venture.

Nosht

Have you ever driven a taxi?
Do you realise the hours needed to work to make a decent wage or are you planning to rent the vehicle out to someone else who will not take care of the vehicle?

N.