19th December 2022
Unlike buying a car through your limited company, buying a van through your company can be quite tax effective.
So what do you need to consider
Be careful check the vehicle is actually classed as a van in HMRC’s eyes!
Firstly you need to be sure that the vehicle you are buying is classed as a van for tax purposes. The dealer you buy your van from should be able to confirm this. If it isn’t a van, then it’s a car and, unless it’s very low emissions it won’t be worthwhile buying this through your company. HMRC have quite a useful list of what they consider vans or cars.
Get the details right.
Whether you’re buying a van through your company outright or via a hire purchase agreement, all documents must be in the company’s name and all payments must go through the company’s bank account.
VAT and corporation tax
The company can claim the full VAT on the purchase price – even if it’s flat rate VAT accounting (assuming the van costs over £2k when purchased new).
The company will also be allowed to write off the full cost of the van in the year of purchase for corporation tax purposes – it will do this via its capital allowance claim and you may be eligible for a super deduction whilst this allowance is available from HMRC.
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, so its best to keep it for a few years in the business and not swop and change it frequently
If you use the van for personal use, you will be liable to a benefit in kind charge on the personal usage, but this is a very low fixed rate benefit that changes each year so check with your accountant to see how that would affect your personal tax position.
If the company also pays all the fuel costs, then you will have a benefit in kind for the personal use of the fuel as well – again check the current rate with your accountant.
These benefits in kind will need to be reported to HMRC each year on a P11d. And the company will also be liable to Class 1a National Insurance on the total benefit – currently 13.8% for the 2022/23 tax year.
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.
You can see the current van and fuel benefits in kind.
A van can be a great way of getting the business to pay for your vehicle but its important to get it right and make sure it suits your personal circumstances. For more information call us now:
have you read our previous post?
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