Buying a small van for sole trader gardening business

lisastevo

My husband set up a small garden maintenance business during lockdown as he was furloughed and we needed extra money. It has really taken off and he is looking at selling his car and getting a small van. As this will still only be a part time business running alongside his full time PAYE job he will not need to be VAT registered. 

All the vans we have looked at have the selling price plus VAT. Will this make a difference with our purchase if he isn’t VAT registered? What do we need to consider having a business vehicle as this will be a first time for us.

TIA

AdrianC

No, it'll make no difference at all. He just pays 20% more than that "+vat" price, and can't reclaim the VAT.

When a vehicle is sold new, VAT is charged on it.
If it's bought by a VAT-reg business, they reclaim the VAT - then they charge it on sale.
This chain continues until it's bought by an individual or non-VAT-reg business, so the VAT isn't reclaimed - then it's sold forever with no VAT.

If there are two identical used vans, one for £10k+vat, one for £12k, they cost an individual or non-VAT-reg business the same (£12k). But a VAT-reg business hands over £12k, then reclaims £2k on their VAT return, so that van is effectively £2k cheaper for them.

Grumpy_chap

Assuming the gardening customers are predominantly private households, then the business will want to stay out of VAT-registration for as long as possible - only register if the customers are businesses and / or the turnover requires registration.  Registering for VAT to simply recover the input VAT on a van will be a false economy in the long run.

Depending where you are in the country, there could be some good opportunities coming along to acquire a van that is not ULEZ compliant.

Mistral001

OPs husband will have to register for VAT only if his turnover is likely exceed £85K a year.  This will apply whether he operates as a sole trader or has some other form of business set-up.   Note a sole trader business is not necessarily a one-person business.    The "sole" in "sole trader" refers to the fact that a sole trader business has a single person who is personally responsible for all debts and financial responsibilities of the business.  A sole trader can have a business of any size and employ as many people as he/she wants.  Many small and medium sized shops are run as sole trader businesses for example having several shop assistants and other employees.  

burlingtonfl6

Van prices are at an all time high and ''VAT free'' ones usually end up costing more because people chase them thinking they are getting them for less. The reality is your choice of good examples is reduced if you limit your options to those that aren't plus VAT.

Supersonos

lisastevo said:

All the vans we have looked at have the selling price plus VAT. Will this make a difference with our purchase if he isn’t VAT registered? 

Everyone pays the full price of the van, including the VAT.  The only difference is, if you were VAT registered, you could then claim back the VAT part of the price.

colino

Well done on being entrepreneurial, but a garden maintenance business in winter in a pandemic shouldn't be rushing to sink cash into a depreciating asset.  Call round your local, independent van rental businesses and see what deals they can offer. There's an awful lot of vehicles sitting in compounds that operators have been left with. 

Mutton_Geoff

How about a large estate or SUV like a Honda CRV or similar? Will he need to carry lawnmowers or other machines? If he's just starting out, a single vehicle will be more cost effective than adding financial liability of a van to a start up business.

Car_54

Mutton_Geoff said:

How about a large estate or SUV like a Honda CRV or similar? Will he need to carry lawnmowers or other machines? If he's just starting out, a single vehicle will be more cost effective than adding financial liability of a van to a start up business.

The OP said "he is looking at selling his car and getting a small van", so just a single vehicle.

born_again

Tow bar & trailer....