How to account for a Van bought outright, sole-trader

FraMil

Jeremy535897 said:

You have to be careful here. Whereas mileage might be a reasonable guide to the business proportion when taken over a year, it is not the be all and end all. For example, a builder who has a car for private mileage might buy a van wholly for business in March, and try it out with a 5 mile trip to the shops. He then gets flu and does no work until the next tax year. That would not mean he can claim no allowances on the van. If it did, you can bet people with normally low business usage would buy a new vehicle a day or two before the year end and make sure it was used 100% for business in that period.

That's true. It's clearly a goods vehicle (a massive one too..!) and I bought it for business purposes, clearly as I foresaw a huge growth in business(=growth in taxes) which has been completely slashed by Covid unfortunatly. I could have been waaaaay better off with a car, or the old car-derived van I had, if it wasn't to grow my business .
Personal use here is basically to go grocery shopping once a week or so...so basically nothing. I wouldn't drive it around in London if I have to go somewhere non-business related, I'd rather use public transport ) .

Jeremy535897

I suggest you look at the business proportion of the old van. You know the business miles you claimed in a year, and the MOT certificates should record total annual mileage (within a month), even if you didn't. Then consider whether there are any reasons why you will use the new van more for business or non-business than the old van, and adjust accordingly.

FraMil

Jeremy535897 said:

I suggest you look at the business proportion of the old van. You know the business miles you claimed in a year, and the MOT certificates should record total annual mileage (within a month), even if you didn't. Then consider whether there are any reasons why you will use the new van more for business or non-business than the old van, and adjust accordingly.

Awesome, thanks Jeremy ! The main question still remains tho: how would I account for it this year then, wanting to use actual costs ? 90% of £14k used entirely as an expense for tax year 2019-2020 ? Or using depreciation 18% of (90% of £14k) for 2019-2020 and spread it on 3-5 years ? (I use cash basis).
Awesome forum this is !! Thank you !!

[Deleted User]

Jeremy535897 said:

purdyoaten2 said:

Yep - missed the old van info.

Not agreeing with you on the AIA though Jeremy. I have claimed some AIA many times over the years.

https://www.gov.uk/capital-allowances/annual-investment-allowance

But you can't claim any capital allowances on the cash basis? The cost of the van (business proportion) is just an expense.

Yes - of course! My apologies - afraid I got too tied up with the AIA plus WDA point. Totally in agreement with you on the ‘stay away from cash basis’ approach.

I have deleted my posts in order not to confuse the op.

Jeremy535897

FraMil said:

Jeremy535897 said:

I suggest you look at the business proportion of the old van. You know the business miles you claimed in a year, and the MOT certificates should record total annual mileage (within a month), even if you didn't. Then consider whether there are any reasons why you will use the new van more for business or non-business than the old van, and adjust accordingly.

Awesome, thanks Jeremy ! The main question still remains tho: how would I account for it this year then, wanting to use actual costs ? 90% of £14k used entirely as an expense for tax year 2019-2020 ? Or using depreciation 18% of (90% of £14k) for 2019-2020 and spread it on 3-5 years ? (I use cash basis).
Awesome forum this is !! Thank you !!

There has been a bit of confusion on here, so to reiterate, if you use the cash basis, you deduct the business proportion of the whole cost of the van in 2019/20, even if it wastes personal allowances.

You can switch from the cash basis to the accruals basis, but it is complex. See:
https://www.litrg.org.uk/tax-guides/self-employment/working-out-profits-losses-and-capital-allowances/how-do-i-prepare-my#infohow

See also https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim70055 et seq

You need an accountant to do this.

[Deleted User]

• Lest there be any doubt (not least due to me)

  Under the current regime, a business need not utilise its entire capital allowances claim – it can choose to defer it, in order to avoid higher rates of tax or preserve the personal allowance. Under the cash basis, this flexibility will be lost.

  Tip: If your client is looking to invest in assets that would be eligible for the AIA or First Year Allowance, and is not expecting to be very profitable initially, then the cash basis might not be suitable for them, because they could risk wasting their personal allowance or not making optimum use of their capital spend.

1001andy

Hi, I'm a sole trader. My accountant has told me that I only buy a van on the AIA scheme and account for it all in one year if it is Zero CO2 emissions. Is this correct ? I've looked on the www.gov.uk and I can't see any reference to Zero emissions when it comes to vans.

[Deleted User]

I believe(d) that it applies to vans regardless of the CO2 emissions. Perhaps something has passed me by but I don’t think so. 

By the way, if you are on the cash basis you have no option but to claim the cost of the van - whether you benefit from the full tax relief or not.

https://taxagents.blog.gov.uk/2014/06/25/annual-investment-allowance-tips/

Jeremy535897

1001andy said:

Hi, I'm a sole trader. My accountant has told me that I only buy a van on the AIA scheme and account for it all in one year if it is Zero CO2 emissions. Is this correct ? I've looked on the www.gov.uk and I can't see any reference to Zero emissions when it comes to vans.

See https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23084

It states that vans qualify.