If you can demonstrate a need for a van for your business, then this could be a really tax efficient way to acquire a van and use it for your biking enjoyment too but there are a few things to watch out for to ensure you are on the right side of the tax man:
Make sure it’s a VAN in the tax man’s eyes – HMRC have a definitive list of what is a van and what is a car so you need to check out what type of vehicle yours is – if it’s a car, the tax consequence are MUCH higher. E.G – a mercedes 115 long dualiner with a high roof = CAR vs. mercedes 115 long dualiner = VAN.
Once you’ve decided that it IS a van and you buy it, then the purchase price will reduce your business taxable profits as you can claim “Capital allowances” on it in the year of purchase
If you are VAT registered, you can also claim all the VAT back on it (unlike for a car where there is a restriction on the amount of VAT you can reclaim)
The flip side of this tax treatment is that you will have to charge VAT when you sell the van and the sales proceeds will be liable to corporation tax.
Once you’ve bought your van, if your private (read Trackday) use is negligible, then there is no tax consequence to you at all
If you do more regular private journeys, then the Van benefit tax charge is still relatively cheap compared to a car – if you’re a basic rate (20%) tax payer then you will only suffer a tax charge of £55 per month
If your business pays for all the fuel as well, then you will incur an additional tax charge of just £10/ mo for a basic (20%) rate tax payer – so, if you do a lot of personal miles then you will want the company to pay all the fuel. However if most of your mileage is business, with very little personal use, you may be better off paying for all your fuel personally and recharging the company for any fuel used for business trips.
So example here:
- Mr. Stalker owns his own roofing business and buys a van for £10,000 + VAT of £2,000 and he uses it occasionally for trackdays – say 20%
- His Company will save £1,520 (£10,000 x 80% business use x 19% tax rate) in corporation tax in the year of purchase by claiming capital allowances
- He can also claim back £1,600 in VAT
- Mr Stalker as a basic rate tax payer will pay tax for personal use of van of £670 for the year
- His business will also pay some NI of £462 for the year
- Net effect – the company saves £1,058 of tax and it has just cost Mr Stalker £55.80 per month for use of the van for trackdays
There may be other factors to consider for your own individual situation but the take home message is the same – if you need a van for trackdays, consider buying one through your business.
Talk to LeeP Accountants for more information & guidance – LeeP – making your money go further.