Tax relief on Electric Van

Cubana48

Hi guys

I am a sole trader carpenter.  Not VAT registered

I am going to get myself an electric van. So many reasons to do it right now.

But I need to know what is the best option for tax relief in this current tax year, as i know the rules have changed. Here are my two options as I understand it. Both of which are based over a 3.5yr period:

Option 1: Buy a very good condition used electric van for £11500 cash
Option 2: PCP  (Personal contract Purchase) deal on a brand new £38000 electric van, whereby I stump up a deposit upfront (say £5k), and then make 40 monthly payments of £539. So after approx 3.5yrs, I would have paid £26560, and have the option of buying the van for the balance.


A few questions:

1: Can i claim tax relief on the full value (£11500) of the second hand van, and can it be done in one tax year or spread over several years.
  
2: Can I claim tax relief on the full hire purchase amount i.e. the deposit and the monthly payments i.e. £26560?

3: Can I also claim the vehicle costs i.e. electricity, MOT, insurance etc


My understanding is that I can either do the above or I can claim the flat rate mileage of 45p/mile.

And I believe that if I am correct in all this, then the decision really comes down to shelling out a large sum upfront (poor for cashflow) with no interest to pay on a van that is slightly old technology but a lower total price, Vs lower monthly payments for the latest tech but overall more tax relief as I will end up paying a higher price for the van.  

Anything else I need to know about buying an electric van for tax purposes either used or new hire purchase?  Any other pros and cons?


Thanks

Grumpy_chap

Recent thread here in Motoring forum for info.  The OP has put into Cutting Tax forum as suggested.
https://forums.moneysavingexpert.com/discussion/6352604/tax-relief-on-electric-van#latest

Jeremy535897

The electric issue is not really relevant as any van, whether electric or diesel, new or second hand, bought by a sole trader for business purposes qualifies for 100% AIA in the first year (or a deduction as an expense if you use the cash basis). If there will be any private usage, only the business proportion may be claimed (that is also true of insurance, licence, repairs, service and fuel).

If the contract is a hire purchase agreement, then the whole of the cost, including the final payment, may be claimed as soon as the van is brought into use (unless you use the cash basis). This is not necessarily a straightforward question, and the answer is likely to depend on whether the final payment is inevitable. If it is not, you are more likely to be able to claim the cost of the van as and when the payments are made.

I am no expert on second hand electric vehicles, but I would suggest that one key issue is the expected remaining life of the battery, whether it still holds the charge it could hold when new (as that affects the range), and whether it can be charged quickly.

Cubana48

Jeremy535897 said:

The electric issue is not really relevant as any van, whether electric or diesel, new or second hand, bought by a sole trader for business purposes qualifies for 100% AIA in the first year (or a deduction as an expense if you use the cash basis). If there will be any private usage, only the business proportion may be claimed (that is also true of insurance, licence, repairs, service and fuel).

If the contract is a hire purchase agreement, then the whole of the cost, including the final payment, may be claimed as soon as the van is brought into use (unless you use the cash basis). This is not necessarily a straightforward question, and the answer is likely to depend on whether the final payment is inevitable. If it is not, you are more likely to be able to claim the cost of the van as and when the payments are made.

I am no expert on second hand electric vehicles, but I would suggest that one key issue is the expected remaining life of the battery, whether it still holds the charge it could hold when new (as that affects the range), and whether it can be charged quickly.

Thanks.  That pretty much answers my question for traditional accounting right?  But I use cash basis.  Can you clarify those points on that assumption please.  I don't understand the parts in brackets: "or a deduction as an expense if you use the cash basis", and "unless you use the cash basis".  So what then?

Jeremy535897

When you use the cash basis, you can't claim capital allowances (except on cars). The payments you make for the van are allowed as an expense in the year that you pay them. The sale proceeds will be treated as a taxable receipt when you sell it. It is much less flexible, and is disadvantageous sometimes if you buy an asset for cash and don't need to take the full cost as a deduction in that year (because of personal allowance perhaps).

Cubana48

I see.  So just so I understand this correctly, whether I buy or PCP an electric van, I can claim the full amount that I pay, but because I claimed the full cost of the vehicle, I have to effectively treat it as income when I sell it?

Jeremy535897

Yes. As I pointed out earlier, if it is not used 100% for business, you can only claim the business proportion (and only the business proportion is taxed on sale).