Buying a commercial vehicle through LTD company

peterc2609

I need a van/pickup for work.

I will use it in addition to my own personal car.

I just asked my accountant if it could be bought through company and he replied by email with:

You can purchase the van from the business but is it worth due to costs involved, ie the tax relief is 20% so any costs in relation to a van will cost you personally 80%.

What does this mean? Why would it personally cost me anythign if it beongs to company??

david69_2

I think you can deduct about 40% of the value in your first year and offset it against your tax bill i might be wrong about this because it was a few years ago when i had my own van
You can also look at leasing if its a new vehicle and you can offset the monthly payment against your tax

peterc2609

can anyone put it in laymans terms??

I'm doing my account soon for last year and can put things through as a taxable expense kinda thing... so I buy something business related for £50 and put it as an expense so my overall profit is 50 quid less....

Can I do this with a 5k van?

Aark

Can I do this with a 5k van?

No. You can claim capital allowances and deduct those from your profit. This is broadly what david69 described, and you may be able to claim 50% of the cost as a First Year Allowance and then a percentage of the remaining balance each year thereafter.

I will use it in addition to my own personal car.

Do you mean that you also use your car in carrying out your Company's trade, or that the van will also be used for private purposes?

peterc2609

I would use the vsn only for work, as I have a smaller car, personally owned, which I would use after work and weekends and stuff.

Basically i need to know what it would mean to me... I spend say 5k from my company bank account on a van, then what happens when I come to do my accounts...?

I just want to pay as little tax as poss!

hopon

You would offset 50% of the cost price in the first year of ownership, ie 50% of £5000 = £2500 then 25% per year of the remainder, so £625 in yr 2, £469 yr 3 etc.

This is the amount you reduce your profit by, NOT the tax saving. The tax saving would then be 19% (currently) of the allowance claimed - so 19% of £2500 = £475 in year 1.

Bean_Counter

peterc2609 wrote: »

You can purchase the van from the business but is it worth due to costs involved, ie the tax relief is 20% so any costs in relation to a van will cost you personally 80%.

What does this mean? Why would it personally cost me anythign if it beongs to company??

He seems to be talking about you buying the van from the business, which doesn't make much sense. I can only assume that by the "20%" he (or she of course) means that any repairs etc on the van are tax deductible against corporation tax at 20%, whereas if you pay for them yourself, you pay 100% of the cost.

Seems rather simplistic for an accountant to advise, hence I must be missing something else from the e-mail.

Why not:

1. Buy the van through the business and claim back VAT (if registered) and capital allowances. All running costs tax deductible. Cost goes into balance sheet.

2. Make sure that you have no personal use of the van to avoid new higher van scale charge.

3. Continue to own the car privately, claiming 40p per mile from company for business use. A very tax efficient way of drawing money from the company!

4. Ask accountant to clarify his answer. After all you are paying him for advice, and you can bet he has put chargeable against that e-mail.

peterc2609

So probably the question I need answeing is...

Is it worth my while buying the van through the company or personally??

Aark

peterc2609 wrote: »

So probably the question I need answeing is...

Is it worth my while buying the van through the company or personally??

If I have understood this correctly and the van is to be used solely in the Company's business, then I can't see any reason for buying it personally. Bean Counter has set out the tax advantages of the Company purchasing the vehicle.

WHA

It will depend mainly on the price/cost of the van and the number of business miles compared to the number of private miles.

If it is a relatively cheap van and you do a lot of business miles, probably better to own personally and claim the 40p per mile rate.

Conversely, if more expensive and a lot of private miles, probably better for company to own it and for you to accept the taxable benefit in kind tax charge.

Assuming you have given the basic information as to price and expected mileage to your accountant, they have probably given you the right answer. If you are in doubt, tell us your answers and someone will either confirm their advice or tell you otherwise.

peterc2609

van/pickup would be around 6k

My business mileage would be around 12000 a year.

I would still have personal car for weekends and evenings etc,(if the taxman needed proof) But the van/pickup for carrying PCs/Servers etc.

My Ltd company earns around 50k a year (IT consultant), I have my everyday expenses and the accountant makes me wage slips for roughly £400 a month, to avoid personal tax etc.

What else do you need to know?

I just want to know what would be the most profitable way of doing it.

I claim mileage at 40p a mile at the moment.