Sole Trader - How to account for new Van purchase
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in Cutting tax
I'm very confused over how to account for a new van purchase as a Sole Trader (Non-VAT Reg).
I will be buying a van approx cost of £12,000 in the next few weeks.
I will also be selling my current vehicle a Pickup Truck for approx £8,000.
What is the most tax effective way to account for this?
Do I simply enter the sale of my Pickup truck as an income to my business of £8000.
Then enter the purchase of my new van as an expense of £12,000?
Will this simply show as a £4000 expense on my business for that one year?
Is this an effective way to account for the expense? As it seems I will only benefit from the purchase for one year, whereas it would be more beneficial to me to have 2 x £2000 expense for two consecutive years.
If the above is correct, do I then just claim the running costs only of the vehicle every year thereafter?
I don't do the mileage scheme, although my vehicle is 100% for business I only cover about 7k miles a year so didn't think it's worthwhile...
I'm very confused about this, and I recently parted ways with my accountant due to his lack of input in situations just like this.
Any help greatly appreciated!
I will be buying a van approx cost of £12,000 in the next few weeks.
I will also be selling my current vehicle a Pickup Truck for approx £8,000.
What is the most tax effective way to account for this?
Do I simply enter the sale of my Pickup truck as an income to my business of £8000.
Then enter the purchase of my new van as an expense of £12,000?
Will this simply show as a £4000 expense on my business for that one year?
Is this an effective way to account for the expense? As it seems I will only benefit from the purchase for one year, whereas it would be more beneficial to me to have 2 x £2000 expense for two consecutive years.
If the above is correct, do I then just claim the running costs only of the vehicle every year thereafter?
I don't do the mileage scheme, although my vehicle is 100% for business I only cover about 7k miles a year so didn't think it's worthwhile...
I'm very confused about this, and I recently parted ways with my accountant due to his lack of input in situations just like this.
Any help greatly appreciated!
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Comments
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if you are not using the simplified expenses method - ie the mileage rate
https://www.gov.uk/simpler-income-tax-simplified-expenses/vehicles-
then you are required to use the capital allowances method
https://www.gov.uk/capital-allowances
now because you are purchasing a van (which is not the same as a car, even if it is a car derived van!) you can claim the annual investment allowance
https://www.gov.uk/capital-allowances/annual-investment-allowance
but, as you do not wish to take the full cost in the year of purchase (why by the way? do you know how to handle losses carried over to other years if that is what you are afraid of) you must therefore use, and stay using, the writing down allowance method until that van is finally sold.
https://www.gov.uk/work-out-capital-allowances/writing-down-allowances
remember you must account for any profit you have made on the sale of the pick up truck, so you must find out how it was originally treated eg if it was claimed under AIA your £8,000 sales is a "balancing charge" and your tax needs adjusting0 -
I'm very confused over how to account for a new van purchase as a Sole Trader (Non-VAT Reg).
I will be buying a van approx cost of £12,000 in the next few weeks.
I will also be selling my current vehicle a Pickup Truck for approx £8,000.
What is the most tax effective way to account for this?
Do I simply enter the sale of my Pickup truck as an income to my business of £8000.
Then enter the purchase of my new van as an expense of £12,000?
Will this simply show as a £4000 expense on my business for that one year?
Is this an effective way to account for the expense? As it seems I will only benefit from the purchase for one year, whereas it would be more beneficial to me to have 2 x £2000 expense for two consecutive years.
If the above is correct, do I then just claim the running costs only of the vehicle every year thereafter?
I don't do the mileage scheme, although my vehicle is 100% for business I only cover about 7k miles a year so didn't think it's worthwhile...
I'm very confused about this, and I recently parted ways with my accountant due to his lack of input in situations just like this.
Any help greatly appreciated!
Ask your old accountant how the pickup was treated for capital allowances purposes and come back to us. Incidentally, if you are claiming the whole £12000 less a balancing charge of £8000 you cannot claim £2000 per year as you seem to wish to do - but more details needed.0 -
[quote=[Deleted User];72730871]Ask your old accountant how the pickup was treated for capital allowances purposes and come back to us. Incidentally, if you are claiming the whole £12000 less a balancing charge of £8000 you cannot claim £2000 per year as you seem to wish to do - but more details needed.[/QUOTE]
Thanks.
I asked my accountant this, and his response (short as usual) was the following:
"We used actual costs"
I hope that means something to someone and it means jack all to me, he's always been this useless. :doh:0 -
he's always been this useless.
Find one who isn't?0 -
Thanks.
I asked my accountant this, and his response (short as usual) was the following:
"We used actual costs"
I hope that means something to someone and it means jack all to me, he's always been this useless. :doh:
A useless answer. Before you can do anything you really need to know:
Was the full cost of the pick up claimed as capital allowances in the year of purchase? IF NOT you need the written down value to be carried forward. Hopefully this will mean something to him. :rotfl:0 -
[quote=[Deleted User];72735522]A useless answer. Before you can do anything you really need to know:
Was the full cost of the pick up claimed as capital allowances in the year of purchase? IF NOT you need the written down value to be carried forward. Hopefully this will mean something to him. :rotfl:[/QUOTE]
Actually looking into my prepared accounts for that year (2015) I can see he claimed an AIA of £7041 and a Higher rate of £955.
There were no other expenses of this size in my business that year, so it has to be my vehicle.
Oddly the vehicle cost £9300, so I don't understand his figures, but it seems my pickup truck was accounted for as an AIA.
In the 2016 year my capital allowances were only £783 total.
Does this mean he claimed everything in the first year?
I'm about ready to grab him by the scruff of the neck and demand a straight forward answer. It's like dealing with a child conversing with this guy. :mad:0 -
Actually looking into my prepared accounts for that year (2015) I can see he claimed an AIA of £7041 and a Higher rate of £955.
There were no other expenses of this size in my business that year, so it has to be my vehicle.
Oddly the vehicle cost £9300, so I don't understand his figures, but it seems my pickup truck was accounted for as an AIA.
In the 2016 year my capital allowances were only £783 total.
Does this mean he claimed everything in the first year?
I'm about ready to grab him by the scruff of the neck and demand a straight forward answer. It's like dealing with a child conversing with this guy. :mad:
AIA = Annual Investment Allowance
Very likely to be your pick-up truck. The vehicle might have cost £9,300 in 2015, but it might not have been beneficial to have claimed 100% of the cost in that year. It is perfectly possible that your accountant only claimed £7,041; the balance would have been carried forward with a writing down allowance being claimed in subsequent years.
Only your accountant can really provide an explanation.0 -
On the back of this thread, can anyone simplify an answer, for how many years can you can write down the value of a van purchase? Can I say I bought a van for 16k this year, put 8k on finance, and put 2k of the remaining 8k cash paid against my profits for 4 years running, along withthe monthly repayments on the other 8k?0
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glasgowdan wrote: »On the back of this thread, can anyone simplify an answer, for how many years can you can write down the value of a van purchase? Can I say I bought a van for 16k this year, put 8k on finance, and put 2k of the remaining 8k cash paid against my profits for 4 years running, along withthe monthly repayments on the other 8k?
You can't do that. If you don't claim the full cost as AIA in the year of purchase, you then have to write it off using WDA rules in subsequent years, probably at the rate of 18% reducing balance basis.
Whether you claim the full £16k in year of purchase or only the £8k you paid in that year depends on whether you're using the cash basis or not (only available as long as you're not trading as a limited company). If cash basis, you only claim the amount you pay in the year.0 -
You can't do that. If you don't claim the full cost as AIA in the year of purchase, you then have to write it off using WDA rules in subsequent years, probably at the rate of 18% reducing balance basis.
Whether you claim the full £16k in year of purchase or only the £8k you paid in that year depends on whether you're using the cash basis or not (only available as long as you're not trading as a limited company). If cash basis, you only claim the amount you pay in the year.
Does that mean it's value reduces 18% each year and is considered an expense?0
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