Buying a truck

Danp_2

Hi guys and girls,

First post - go easy on me!

I am recently self employed (sole trader), I consult on a full time basses for a Canadian company. My annual income is £30,000. I am looking to buy a Mitsubishi L200 2006 as a company vehicle. The vehicle will be used purely for business mileage. The truck is costing £7500 - can I put the total cost of the vehicle through the books?

I am doing this mainly to reduce my tax bill at the end of the year, in your opinions would I be financially better off not buying the truck and paying a larger tax sum at the end of the year or buy the truck to reduce the tax bill? I really don't have much in the way of expenses going through the books as the company refund all my expenses directly back to my bank account. So I think I will be paying a rather large tax bill come next year unless I send some money...or not?

HELP - CONFUSED! :eek:

jimmo

Sorry to seem picky but as you are self employed it is not going to be a company vehicle. I would describe it as a business vehicle.
The term "company vehicle" is normally associated with a vehicle provided by an employer for use by an employee and the tax treatment is very different to your situation.
Having got that out of the way, the next question is whether your chosen vehicle is a car or a van for tax purposes.
Take a look here for the HMRC view.
http://www.hmrc.gov.uk/manuals/eimanual/EIM23150.htm
If it is a van and used exclusively for business travel you can claim tax relief on the full cost of £7,500 in the year of purchase. In your circumstances that tax relief is almost certainly (7500*20%) £1,500.
There will also be a corresponding reduction in your Class 4 NICs (7500*9%) £675.
However when you stop using the vehicle as a business vehicle there will be a balancing charge on the residual value of the vehicle.
You will also be able to claim tax relief on the running costs, fuel, road tax, insurance, etc.
If it is a car you will only be able to claim writing down allowances at 20%.
http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1086393051&r.l1=1073858808&r.l2=1086692188&r.l3=1086445219&r.l4=1086384131&r.s=sc&type=RESOURCES
In the year of purchase the allowance will be (7500*20%) 1500 and, at 29%, the combined tax and NIC relief will be worth £435.
In the following year the allowance will be based on the value brought forward (7500 - 1500) 6000 and the allowance will be (6000 * 20%) 1200 so the combined tax and NIC relief will be worth £348.
Again you will be entitled to claim for the running costs.
When you stop using the vehicle there may be a balancing charge or there may be a balancing allowance.
Regardless of whether the vehicle is a car or a van, you have the option to do away with all that by claiming the fixed rate allowance of 45 pence per business mile for the first 10,000 miles in the tax year and 25 pence per mile for anything above 10,000.
http://www.hmrc.gov.uk/manuals/bimmanual/BIM47701.htm
Can I ask how you treat the expenses you receive from your client?
Do you declare them as a part of your business turnover and deduct your actual costs in your profit and loss account?
To put it bluntly, if you are considering buying a particular vehicle as a tax saving device, you need to understand how tax works before you spend a penny.

olivetti

Depending on what your your actual relationship is with the Canadian company is you may also not be self-employed. more info here including a status indicator:

http://www.hmrc.gov.uk/employment-status/index.htm


Employment Status Indicator (ESI) tool:

http://www.hmrc.gov.uk/calcs/esi.htm

Danp_2

Can I ask how you treat the expenses you receive from your client?
Do you declare them as a part of your business turnover and deduct your actual costs in your profit and loss account?
To put it bluntly, if you are considering buying a particular vehicle as a tax saving device, you need to understand how tax works before you spend a penny.

All this is so new to me. I have been burying my head in the sand for a while about all this now (about 6 months). I really need to speak with an accountant to find out what I can cannot claim.

I send them an invoice @ the end of the month for consultancy fees, an invoice for mileage & an invoice for expenses and they pay it all directly as 1 payment at the beginning of the next month direct to my business account.

The only record I keep of any expenses are receipts and they get attached to my hard copy of expenses and from there they go to my UK contact/boss and sends them to the UK company accountant.

I do have a small income from a security company and I keep all the receipts for that and file them. But as yet I haven't worked out incoming & outgoings for any month - I simply haven't got around to doing it as its not my main income.

Pennywise

jimmo wrote: »

In the year of purchase the allowance will be (7500*20%) 1500 and, at 29%, the combined tax and NIC relief will be worth £435.
In the following year the allowance will be based on the value brought forward (7500 - 1500) 6000 and the allowance will be (6000 * 20%) 1200 so the combined tax and NIC relief will be worth £348.

Surely if 100% allowance is claimed in year 1, there is no balance carried forward to subsequent years?

leveller2911

Pennywise wrote: »

Surely if 100% allowance is claimed in year 1, there is no balance carried forward to subsequent years?

I'm probably wrong but I thought that as its not a van (ie classed as a car)they would only be claiming 20% tax relief in the first year and not 100% that they could claim if it was a van?

westy22

Take Mitsubishi’s L200 four-wheel drive Double Cab, for example. Thanks to its combination of reliability, drivability, impressive styling and work hard/play hard ethic this vehicle has become something of a cult. Yet despite its exceptional good looks, its load capacity, even with a canopy fitted, means that for BIK tax and VAT purposes every single model is classed as a light commercial vehicle (LCV).

This is from Mitsubishi's web site relating to tax - the L200 is a light commercial vehicle, not a car for tax purposes. Therefore it falls within Annual Allowance and eligible for 100% write-off in year of purchase.

leveller2911

westy22 wrote: »

This is from Mitsubishi's web site relating to tax - the L200 is a light commercial vehicle, not a car for tax purposes. Therefore it falls within Annual Allowance and eligible for 100% write-off in year of purchase.

Its all a bit confusing as I've just looked at the HMRC website (link below) and the Mitsubishi L200 is'nt on the list and neither is the Toyota hilux crew-cab that my colleague has just ordered.


http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&id=HMCE_PROD_010443&propertyType=document

also a question posted regarding subject ,so it seems its a grey area particularly regarding payload area and payload weights.

http://www.justanswer.com/uk-tax/37t4a-100-tax-relief-toyota-hilux-commercial.html

Llyllyll

westy22 wrote: »

This is from Mitsubishi's web site relating to tax - the L200 is a light commercial vehicle, not a car for tax purposes. Therefore it falls within Annual Allowance and eligible for 100% write-off in year of purchase.

Don't forget that it's HMRC who make the decision, not Mitsubishi. Best check with the tax office first.

John_Pierpoint

http://www.accountingweb.co.uk/anyanswers/mitsubishi-l200-pick-aia

lordbase

If your question is whether you are better off buying the van or not buying the van - you are spending £7,500 to get tax relief of £2,175 (income tax at 20% = £1,500 + NIC at 9% = 675). So overall by buying the van you are £5,325 WORSE off.

However, if you need to get a new van then you might as well claim the tax relief on it.