Van business tax liabilities

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pjbetman
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Joined in 2017

PostVan business tax liabilities
by pjbetman » Thu Dec 19, 2019 12:52 am

A bit late in the evening for most....however, i've been sorting out my self assessment tax form. And, i'm unsure what to do about a van i bought for my business, February this year. I've bought the vehicle with Peugeot Finance. I will own it outright in 5 years. Cost of van, inc. interest, is about £18,000.

I'm confused about what my options are. I'd like to offset a decent chunk against tax, maybe not for this deadline (2018-2019), but in 2019-2020. Like this:-

Year 1 - 20%
Year 2 - 40%
Year 3 - 20%
Year 4 - 10%
Year 5 - 10%

Or does it have to be 18% per year. Or something like that?

Reason being, I had a mediocre year, with a lot of set up costs (tools, training etc). This year been much better, although still spending big on equipment etc, so would like to significantly reduce my tax obligations as much as possible. Then the following years, probably will have a much better income.

Anyone have an accounting knowledge of this stuff? Or somewhere that can explain it in clear terms?

Cheers

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Ecno
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Location: There're no Wolves

PostRe: Van business tax liabilities
by Ecno » Thu Dec 19, 2019 1:04 am

Is this under a Ltd company?

Edit:I was having a look on the HMRC website and I don't know enough about tax to give solid advice, but you should be able able to knock 100% of the cost off against your first year tax bill under Annual Investment Allowance. Who does your taxes usually?

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Grumpy David
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PostRe: Van business tax liabilities
by Grumpy David » Thu Dec 19, 2019 1:12 am

Best not to take tax advice from Grcade. Pay someone qualified to do your tax return and to advise you. I imagine you can offset the cost of their service too.

I'd imagine you can offset the interest but not the principle on the van.

Ecno wrote:Is this under a Ltd company?


I know sole traders can do their own self assessment but I'd have thought unless you are a qualified accountant you aren't able to do a LTD company return?

pjbetman
Member
Joined in 2017

PostRe: Van business tax liabilities
by pjbetman » Thu Dec 19, 2019 1:37 am

Ecno wrote:Is this under a Ltd company?

Edit:I was having a look on the HMRC website and I don't know enough about tax to give solid advice, but you should be able able to knock 100% of the cost off against your first year tax bill under Annual Investment Allowance. Who does your taxes usually?



Sole trader.

Yeah. It's all a bit confusing.

I think that i can either offset a percentage each year. Or i can simply base the tax eduction from the mileage allowances. So, 45p per mile for say 10,000 is £4500. And then 25p per mile after that. So probably about £5,000 per year deducted from income. Not really giving me much that really.

Of course, I will be needing some proper advice, but just wanted to see if anyone here deals with stuff like that, and what they say.

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Green Gecko
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Location: Sussex
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PostRe: Van business tax liabilities
by Green Gecko » Thu Dec 19, 2019 2:30 am

Grumpy David wrote:Best not to take tax advice from Grcade. Pay someone qualified to do your tax return and to advise you. I imagine you can offset the cost of their service too.

I'd imagine you can offset the interest but not the principle on the van.

Ecno wrote:Is this under a Ltd company?


I know sole traders can do their own self assessment but I'd have thought unless you are a qualified accountant you aren't able to do a LTD company return?

You can, I've done several. Accounts only have to be have to be audited if the company earns over a certain amount. Micro-entity accounts can be completed by the company director.

Normally if you buy a fixed asset like a vehicle outright what you want to do is claim a capital allowance which gives you 100% tax relief in one year if you use depreciation. You can claim 100% of the fixed asset (the van in this case) as part of your Annual Investment Allowance. You can claim up to £200,000 per year at the moment (although for 1 or 2 years until 2020 it might be £2 million) in AIA investments. AIA allows you to deduct 100% of the cost from your revenue before you work out your taxable profit. https://www.taxcafe.co.uk/resources/cas ... iture.html

It's probably most sensible to deduct whatever amount you're actually charged during the trading year, however you might be able to claim the total amount in one year provided you have an invoice for the total amount. Your difficulty is going to be the fact you don't have any records for having paid that amount, because, well, you haven't paid it yet. Ask an accountant.

A van should be categorised as Plant & Machinery. You should also be able to claim the interest, because it is incurred wholly and exclusively for the purposes of running the business for which you have bought the van. Whether you claim that as bank fees or create an account code just for loan or lease interest or factor it into the total amount, I'm not sure it really matters, provided you are claiming within the maximum amount allowed during any given accounting period (so £200,000 in year one). Anyway if the van is just £18,000 you're never going to claim all of your AIA. But you should still claim it as a capital expense / create a fixed asset for it because it's not something incurred in the normal day to day course of running your business like, for example, stationary, it's a major asset you buy for the business and then it sits there and slowly loses value (depreciation)

You should also depreciate the asset over time, as it can give you enough tax relief to replace it eventually and lower your tax bill. The benefit of calculating depreciation from day one is that you can spread your tax relief over a longer period to reduce your tax liability, as you might not necessarily make any profit in your first few years. For example you might set up the schedule so it takes 5 or 10 years to reduce a vehicle's value to zero, depending on how long you think it will last (for example a new car might have a 5 year warranty).

You can carry forward trading losses (where your expenses and capital allowances exceed your total net profit in any given year) for up to four years, so you will still get tax relief on the van if you don't claim it as part of your annual investment allowance, because instead you claim the amount(s) you are paying for the lease. https://www.litrg.org.uk/tax-guides/sel ... -make-loss

If you do claim the car as a capital allowance, don't also claim the monthly payments as an expense, or you'll be accounting for it twice.

I'm not sure if you can claim depreciation in addition to a capital allowance, but it would seem to make sense to me that you should be able to (how you claim tax relief for the fixed asset doesn't change the fact its value depreciates over time).

https://www.gov.uk/capital-allowances

https://www.gov.uk/capital-allowances/w ... n-claim-on

I'm not an accounting expert. I have a few items down as capital allowances in the past (looking back, it seems I forgot to claim some and put them down as an expense, but there's no point revising previous tax years and I didn't owe anything anyway). If you're not sure ask an accountant, but provided and you are paying the right amount of tax, I reckon HMRC don't really care what your accounts say provided they exist and are maintained along with invoices, bills and receipts etc. for 6 years.

My advice is pretty simple. Good accounting and budgeting is about record keeping what's actually happened. Not what you wish happened or want things to look (i.e. fudging accounts).

If what's actually happened is you're paying a certain amount each month towards a vehicle, you could probably claim that as an expense including the interest (you could specify each on separate lines and code one as plant and machinery and one as loan interest) until eventually it adds up to a decent amount of tax relief for you. But if you wanted to massively reduce your liability by claiming the entire expense, I think technically you would need a record of that payment actually being made in full, or it's not really accurate. That is why, for tax purposes, it may be beneficial to purchase an item outright on something like a credit card or business loan so that you can claim 100% relief on the full amount.

You can probably create a record for the full amount of the van and claim it as an AIA along with a copy of your invoice or least agreement / payment schedule, but personally I prefer to have my accounting lines match 1:1 with what my payments actually are. I very rarely create any transactions as they're already made through the bank and statements are evidence of that together with invoices, which you need.

You have other benefits to a lease that help reduce your business' costs (including tax) in other ways though, generally you get better rates on repairs and spare parts or an extended warranty or breakdown cover or something like that, and if you register for VAT you can claim that back on all the payments too. Some lease providers offer calculators that help you figure this sort of thing out.

It's not a bad thing to buy an asset over a few years (besides being easier on your cashflow and credit rating because for example you defaulted on something after blowing all your money on one big expense), as you can claim what you pay each and every year and either carry forward or carry back losses to reduce your tax liability next year or in previous years, in the latter case. If you do that, you'll get a tax rebate from HMRC, but I'm not sure about the paperwork as I've only carried forward losses incurred while getting started with my business.

It's worth reminding don't forget to claim things like your home office, including proportion of utilities, rent/mortgage, council or any office/computer equipment etc. as that can add up to a few K per year you should get back.

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pjbetman
Member
Joined in 2017

PostRe: Van business tax liabilities
by pjbetman » Thu Dec 19, 2019 10:16 am

Green Gecko wrote:
Grumpy David wrote:Best not to take tax advice from Grcade. Pay someone qualified to do your tax return and to advise you. I imagine you can offset the cost of their service too.

I'd imagine you can offset the interest but not the principle on the van.

Ecno wrote:Is this under a Ltd company?


I know sole traders can do their own self assessment but I'd have thought unless you are a qualified accountant you aren't able to do a LTD company return?

You can, I've done several. Accounts only have to be have to be audited if the company earns over a certain amount. Micro-entity accounts can be completed by the company director.

Normally if you buy a fixed asset like a vehicle outright what you want to do is claim a capital allowance which gives you 100% tax relief in one year if you use depreciation. You can claim 100% of the fixed asset (the van in this case) as part of your Annual Investment Allowance. You can claim up to £200,000 per year at the moment (although for 1 or 2 years until 2020 it might be £2 million) in AIA investments. AIA allows you to deduct 100% of the cost from your revenue before you work out your taxable profit. https://www.taxcafe.co.uk/resources/cas ... iture.html

It's probably most sensible to deduct whatever amount you're actually charged during the trading year, however you might be able to claim the total amount in one year provided you have an invoice for the total amount. Your difficulty is going to be the fact you don't have any records for having paid that amount, because, well, you haven't paid it yet. Ask an accountant.

A van should be categorised as Plant & Machinery. You should also be able to claim the interest, because it is incurred wholly and exclusively for the purposes of running the business for which you have bought the van. Whether you claim that as bank fees or create an account code just for loan or lease interest or factor it into the total amount, I'm not sure it really matters, provided you are claiming within the maximum amount allowed during any given accounting period (so £200,000 in year one). Anyway if the van is just £18,000 you're never going to claim all of your AIA. But you should still claim it as a capital expense / create a fixed asset for it because it's not something incurred in the normal day to day course of running your business like, for example, stationary, it's a major asset you buy for the business and then it sits there and slowly loses value (depreciation)

You should also depreciate the asset over time, as it can give you enough tax relief to replace it eventually and lower your tax bill. The benefit of calculating depreciation from day one is that you can spread your tax relief over a longer period to reduce your tax liability, as you might not necessarily make any profit in your first few years. For example you might set up the schedule so it takes 5 or 10 years to reduce a vehicle's value to zero, depending on how long you think it will last (for example a new car might have a 5 year warranty).

You can carry forward trading losses (where your expenses and capital allowances exceed your total net profit in any given year) for up to four years, so you will still get tax relief on the van if you don't claim it as part of your annual investment allowance, because instead you claim the amount(s) you are paying for the lease. https://www.litrg.org.uk/tax-guides/sel ... -make-loss

If you do claim the car as a capital allowance, don't also claim the monthly payments as an expense, or you'll be accounting for it twice.

I'm not sure if you can claim depreciation in addition to a capital allowance, but it would seem to make sense to me that you should be able to (how you claim tax relief for the fixed asset doesn't change the fact its value depreciates over time).

https://www.gov.uk/capital-allowances

https://www.gov.uk/capital-allowances/w ... n-claim-on

I'm not an accounting expert. I have a few items down as capital allowances in the past (looking back, it seems I forgot to claim some and put them down as an expense, but there's no point revising previous tax years and I didn't owe anything anyway). If you're not sure ask an accountant, but provided and you are paying the right amount of tax, I reckon HMRC don't really care what your accounts say provided they exist and are maintained along with invoices, bills and receipts etc. for 6 years.

My advice is pretty simple. Good accounting and budgeting is about record keeping what's actually happened. Not what you wish happened or want things to look (i.e. fudging accounts).

If what's actually happened is you're paying a certain amount each month towards a vehicle, you could probably claim that as an expense including the interest (you could specify each on separate lines and code one as plant and machinery and one as loan interest) until eventually it adds up to a decent amount of tax relief for you. But if you wanted to massively reduce your liability by claiming the entire expense, I think technically you would need a record of that payment actually being made in full, or it's not really accurate. That is why, for tax purposes, it may be beneficial to purchase an item outright on something like a credit card or business loan so that you can claim 100% relief on the full amount.

You can probably create a record for the full amount of the van and claim it as an AIA along with a copy of your invoice or least agreement / payment schedule, but personally I prefer to have my accounting lines match 1:1 with what my payments actually are. I very rarely create any transactions as they're already made through the bank and statements are evidence of that together with invoices, which you need.

You have other benefits to a lease that help reduce your business' costs (including tax) in other ways though, generally you get better rates on repairs and spare parts or an extended warranty or breakdown cover or something like that, and if you register for VAT you can claim that back on all the payments too. Some lease providers offer calculators that help you figure this sort of thing out.

It's not a bad thing to buy an asset over a few years (besides being easier on your cashflow and credit rating because for example you defaulted on something after blowing all your money on one big expense), as you can claim what you pay each and every year and either carry forward or carry back losses to reduce your tax liability next year or in previous years, in the latter case. If you do that, you'll get a tax rebate from HMRC, but I'm not sure about the paperwork as I've only carried forward losses incurred while getting started with my business.

It's worth reminding don't forget to claim things like your home office, including proportion of utilities, rent/mortgage, council or any office/computer equipment etc. as that can add up to a few K per year you should get back.


Cheers, GG.

So, if i claim for interest and then plant and machinery, which is the total of the loan payments (£290/month), can i then still put fuel receipts, repairs etc onto the tax assessment form?

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Green Gecko
Treasurer
Joined in 2008
Location: Sussex
Contact:

PostRe: Van business tax liabilities
by Green Gecko » Thu Dec 19, 2019 5:13 pm

pjbetman wrote:
Green Gecko wrote:
Grumpy David wrote:Best not to take tax advice from Grcade. Pay someone qualified to do your tax return and to advise you. I imagine you can offset the cost of their service too.

I'd imagine you can offset the interest but not the principle on the van.

Ecno wrote:Is this under a Ltd company?


I know sole traders can do their own self assessment but I'd have thought unless you are a qualified accountant you aren't able to do a LTD company return?

You can, I've done several. Accounts only have to be have to be audited if the company earns over a certain amount. Micro-entity accounts can be completed by the company director.

Normally if you buy a fixed asset like a vehicle outright what you want to do is claim a capital allowance which gives you 100% tax relief in one year if you use depreciation. You can claim 100% of the fixed asset (the van in this case) as part of your Annual Investment Allowance. You can claim up to £200,000 per year at the moment (although for 1 or 2 years until 2020 it might be £2 million) in AIA investments. AIA allows you to deduct 100% of the cost from your revenue before you work out your taxable profit. https://www.taxcafe.co.uk/resources/cas ... iture.html

It's probably most sensible to deduct whatever amount you're actually charged during the trading year, however you might be able to claim the total amount in one year provided you have an invoice for the total amount. Your difficulty is going to be the fact you don't have any records for having paid that amount, because, well, you haven't paid it yet. Ask an accountant.

A van should be categorised as Plant & Machinery. You should also be able to claim the interest, because it is incurred wholly and exclusively for the purposes of running the business for which you have bought the van. Whether you claim that as bank fees or create an account code just for loan or lease interest or factor it into the total amount, I'm not sure it really matters, provided you are claiming within the maximum amount allowed during any given accounting period (so £200,000 in year one). Anyway if the van is just £18,000 you're never going to claim all of your AIA. But you should still claim it as a capital expense / create a fixed asset for it because it's not something incurred in the normal day to day course of running your business like, for example, stationary, it's a major asset you buy for the business and then it sits there and slowly loses value (depreciation)

You should also depreciate the asset over time, as it can give you enough tax relief to replace it eventually and lower your tax bill. The benefit of calculating depreciation from day one is that you can spread your tax relief over a longer period to reduce your tax liability, as you might not necessarily make any profit in your first few years. For example you might set up the schedule so it takes 5 or 10 years to reduce a vehicle's value to zero, depending on how long you think it will last (for example a new car might have a 5 year warranty).

You can carry forward trading losses (where your expenses and capital allowances exceed your total net profit in any given year) for up to four years, so you will still get tax relief on the van if you don't claim it as part of your annual investment allowance, because instead you claim the amount(s) you are paying for the lease. https://www.litrg.org.uk/tax-guides/sel ... -make-loss

If you do claim the car as a capital allowance, don't also claim the monthly payments as an expense, or you'll be accounting for it twice.

I'm not sure if you can claim depreciation in addition to a capital allowance, but it would seem to make sense to me that you should be able to (how you claim tax relief for the fixed asset doesn't change the fact its value depreciates over time).

https://www.gov.uk/capital-allowances

https://www.gov.uk/capital-allowances/w ... n-claim-on

I'm not an accounting expert. I have a few items down as capital allowances in the past (looking back, it seems I forgot to claim some and put them down as an expense, but there's no point revising previous tax years and I didn't owe anything anyway). If you're not sure ask an accountant, but provided and you are paying the right amount of tax, I reckon HMRC don't really care what your accounts say provided they exist and are maintained along with invoices, bills and receipts etc. for 6 years.

My advice is pretty simple. Good accounting and budgeting is about record keeping what's actually happened. Not what you wish happened or want things to look (i.e. fudging accounts).

If what's actually happened is you're paying a certain amount each month towards a vehicle, you could probably claim that as an expense including the interest (you could specify each on separate lines and code one as plant and machinery and one as loan interest) until eventually it adds up to a decent amount of tax relief for you. But if you wanted to massively reduce your liability by claiming the entire expense, I think technically you would need a record of that payment actually being made in full, or it's not really accurate. That is why, for tax purposes, it may be beneficial to purchase an item outright on something like a credit card or business loan so that you can claim 100% relief on the full amount.

You can probably create a record for the full amount of the van and claim it as an AIA along with a copy of your invoice or least agreement / payment schedule, but personally I prefer to have my accounting lines match 1:1 with what my payments actually are. I very rarely create any transactions as they're already made through the bank and statements are evidence of that together with invoices, which you need.

You have other benefits to a lease that help reduce your business' costs (including tax) in other ways though, generally you get better rates on repairs and spare parts or an extended warranty or breakdown cover or something like that, and if you register for VAT you can claim that back on all the payments too. Some lease providers offer calculators that help you figure this sort of thing out.

It's not a bad thing to buy an asset over a few years (besides being easier on your cashflow and credit rating because for example you defaulted on something after blowing all your money on one big expense), as you can claim what you pay each and every year and either carry forward or carry back losses to reduce your tax liability next year or in previous years, in the latter case. If you do that, you'll get a tax rebate from HMRC, but I'm not sure about the paperwork as I've only carried forward losses incurred while getting started with my business.

It's worth reminding don't forget to claim things like your home office, including proportion of utilities, rent/mortgage, council or any office/computer equipment etc. as that can add up to a few K per year you should get back.


Cheers, GG.

So, if i claim for interest and then plant and machinery, which is the total of the loan payments (£290/month), can i then still put fuel receipts, repairs etc onto the tax assessment form?

Yes.

The tax rules and exactly what and how much you can claim as expenses in any given accounting period to a degree which is "reasonable" is the job of an accountant simply interpreting the rules in your favour. But a lot of these things you can get from the gov website or HMRC directly. They do some web seminars and QAs and things, and you can also call them for advice. It's not true that you need an accountant for stuff like this (and they won't do your record keeping for you anyway, only prepare your end of year accounts and SA - that usually costs about £75-£120 from an independent local accountant). Otherwise, the basic definition of an expense is one which is "wholly and exclusively incurred in the course of doing business" so, for example, the direct cost of materials needed to render a product or service, or the cost of your accountant in order to ensure your papers are in order. Provided that's true, you can claim pretty much anything. It only gets dodgy when you start claiming things like entertaining clients, or employee parties, or stuff that you just don't really use for business or can't reasonably be explained as being purchased for a business need. And you must be paying for these things with a view to making a profit; not buying cool stuff to fund a hobby through the tax relief system. Most people can demonstrate that isn't true by copies of sales invoices to prove you sell stuff to people i.e. you are a business.

I don't think it matters by what arrangement you determine is best for you to purchase an asset like a van. You still incur expenses like MOT, road tax, fuel

If you don't use it entirely for business, you need to split the costs into separate lines for % business and % personal use. For example, for my mobile phone SIM, I charge 50% against the business as an operating expense (overheads) and 50% as "Owner Funds Withdrawn" which basically means I've spent that money on myself, and not the business (personal use). You can do the same thing for any kind of bill that is partly incurred by the business and partly incurred by yourself as a private individual (even though as a sole trader you are both a business and a private individual).

As a sole trader, you are generally held to a lower standard of scrutiny for this sort of thing, provided you are not taking the piss. Be a good citizen and simply do you best effort to tell the truth by accurately reporting your income and expenditure for the business and you'll be fine.

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pjbetman
Member
Joined in 2017

PostRe: Van business tax liabilities
by pjbetman » Fri Dec 20, 2019 9:29 am

Green Gecko wrote:
pjbetman wrote:
Green Gecko wrote:
Grumpy David wrote:Best not to take tax advice from Grcade. Pay someone qualified to do your tax return and to advise you. I imagine you can offset the cost of their service too.

I'd imagine you can offset the interest but not the principle on the van.

Ecno wrote:Is this under a Ltd company?


I know sole traders can do their own self assessment but I'd have thought unless you are a qualified accountant you aren't able to do a LTD company return?

You can, I've done several. Accounts only have to be have to be audited if the company earns over a certain amount. Micro-entity accounts can be completed by the company director.

Normally if you buy a fixed asset like a vehicle outright what you want to do is claim a capital allowance which gives you 100% tax relief in one year if you use depreciation. You can claim 100% of the fixed asset (the van in this case) as part of your Annual Investment Allowance. You can claim up to £200,000 per year at the moment (although for 1 or 2 years until 2020 it might be £2 million) in AIA investments. AIA allows you to deduct 100% of the cost from your revenue before you work out your taxable profit. https://www.taxcafe.co.uk/resources/cas ... iture.html

It's probably most sensible to deduct whatever amount you're actually charged during the trading year, however you might be able to claim the total amount in one year provided you have an invoice for the total amount. Your difficulty is going to be the fact you don't have any records for having paid that amount, because, well, you haven't paid it yet. Ask an accountant.

A van should be categorised as Plant & Machinery. You should also be able to claim the interest, because it is incurred wholly and exclusively for the purposes of running the business for which you have bought the van. Whether you claim that as bank fees or create an account code just for loan or lease interest or factor it into the total amount, I'm not sure it really matters, provided you are claiming within the maximum amount allowed during any given accounting period (so £200,000 in year one). Anyway if the van is just £18,000 you're never going to claim all of your AIA. But you should still claim it as a capital expense / create a fixed asset for it because it's not something incurred in the normal day to day course of running your business like, for example, stationary, it's a major asset you buy for the business and then it sits there and slowly loses value (depreciation)

You should also depreciate the asset over time, as it can give you enough tax relief to replace it eventually and lower your tax bill. The benefit of calculating depreciation from day one is that you can spread your tax relief over a longer period to reduce your tax liability, as you might not necessarily make any profit in your first few years. For example you might set up the schedule so it takes 5 or 10 years to reduce a vehicle's value to zero, depending on how long you think it will last (for example a new car might have a 5 year warranty).

You can carry forward trading losses (where your expenses and capital allowances exceed your total net profit in any given year) for up to four years, so you will still get tax relief on the van if you don't claim it as part of your annual investment allowance, because instead you claim the amount(s) you are paying for the lease. https://www.litrg.org.uk/tax-guides/sel ... -make-loss

If you do claim the car as a capital allowance, don't also claim the monthly payments as an expense, or you'll be accounting for it twice.

I'm not sure if you can claim depreciation in addition to a capital allowance, but it would seem to make sense to me that you should be able to (how you claim tax relief for the fixed asset doesn't change the fact its value depreciates over time).

https://www.gov.uk/capital-allowances

https://www.gov.uk/capital-allowances/w ... n-claim-on

I'm not an accounting expert. I have a few items down as capital allowances in the past (looking back, it seems I forgot to claim some and put them down as an expense, but there's no point revising previous tax years and I didn't owe anything anyway). If you're not sure ask an accountant, but provided and you are paying the right amount of tax, I reckon HMRC don't really care what your accounts say provided they exist and are maintained along with invoices, bills and receipts etc. for 6 years.

My advice is pretty simple. Good accounting and budgeting is about record keeping what's actually happened. Not what you wish happened or want things to look (i.e. fudging accounts).

If what's actually happened is you're paying a certain amount each month towards a vehicle, you could probably claim that as an expense including the interest (you could specify each on separate lines and code one as plant and machinery and one as loan interest) until eventually it adds up to a decent amount of tax relief for you. But if you wanted to massively reduce your liability by claiming the entire expense, I think technically you would need a record of that payment actually being made in full, or it's not really accurate. That is why, for tax purposes, it may be beneficial to purchase an item outright on something like a credit card or business loan so that you can claim 100% relief on the full amount.

You can probably create a record for the full amount of the van and claim it as an AIA along with a copy of your invoice or least agreement / payment schedule, but personally I prefer to have my accounting lines match 1:1 with what my payments actually are. I very rarely create any transactions as they're already made through the bank and statements are evidence of that together with invoices, which you need.

You have other benefits to a lease that help reduce your business' costs (including tax) in other ways though, generally you get better rates on repairs and spare parts or an extended warranty or breakdown cover or something like that, and if you register for VAT you can claim that back on all the payments too. Some lease providers offer calculators that help you figure this sort of thing out.

It's not a bad thing to buy an asset over a few years (besides being easier on your cashflow and credit rating because for example you defaulted on something after blowing all your money on one big expense), as you can claim what you pay each and every year and either carry forward or carry back losses to reduce your tax liability next year or in previous years, in the latter case. If you do that, you'll get a tax rebate from HMRC, but I'm not sure about the paperwork as I've only carried forward losses incurred while getting started with my business.

It's worth reminding don't forget to claim things like your home office, including proportion of utilities, rent/mortgage, council or any office/computer equipment etc. as that can add up to a few K per year you should get back.


Cheers, GG.

So, if i claim for interest and then plant and machinery, which is the total of the loan payments (£290/month), can i then still put fuel receipts, repairs etc onto the tax assessment form?

Yes.

The tax rules and exactly what and how much you can claim as expenses in any given accounting period to a degree which is "reasonable" is the job of an accountant simply interpreting the rules in your favour. But a lot of these things you can get from the gov website or HMRC directly. They do some web seminars and QAs and things, and you can also call them for advice. It's not true that you need an accountant for stuff like this (and they won't do your record keeping for you anyway, only prepare your end of year accounts and SA - that usually costs about £75-£120 from an independent local accountant). Otherwise, the basic definition of an expense is one which is "wholly and exclusively incurred in the course of doing business" so, for example, the direct cost of materials needed to render a product or service, or the cost of your accountant in order to ensure your papers are in order. Provided that's true, you can claim pretty much anything. It only gets dodgy when you start claiming things like entertaining clients, or employee parties, or stuff that you just don't really use for business or can't reasonably be explained as being purchased for a business need. And you must be paying for these things with a view to making a profit; not buying cool stuff to fund a hobby through the tax relief system. Most people can demonstrate that isn't true by copies of sales invoices to prove you sell stuff to people i.e. you are a business.

I don't think it matters by what arrangement you determine is best for you to purchase an asset like a van. You still incur expenses like MOT, road tax, fuel

If you don't use it entirely for business, you need to split the costs into separate lines for % business and % personal use. For example, for my mobile phone SIM, I charge 50% against the business as an operating expense (overheads) and 50% as "Owner Funds Withdrawn" which basically means I've spent that money on myself, and not the business (personal use). You can do the same thing for any kind of bill that is partly incurred by the business and partly incurred by yourself as a private individual (even though as a sole trader you are both a business and a private individual).

As a sole trader, you are generally held to a lower standard of scrutiny for this sort of thing, provided you are not taking the piss. Be a good citizen and simply do you best effort to tell the truth by accurately reporting your income and expenditure for the business and you'll be fine.


Thanks bud! Yes, thought i was going to lose out on some legitimate business expenses for a minute.


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