Tax question

[goosegreen]

I am going to be buying a newer van soon and will spend about £5000 of my own money How can I put this through my books? Would it be better to show it as a loan and how would I ofset the amount against tax any held would be appreciated as I do my own accounts

Goosegreen

[Tinhips]

Re: Tax question

I had the same question a couple of years back and my accountant adviced this.

Assuming you are self employed, as opposed to a limited company, you are better to borrow the money off a third party, could be wife/partner, so long as they are not directors, as any of your own money paid into your business, will be seen by inland revenue as income and attract tax.

Make an agreement between yourselves in writting. You can then show the repayments as an out going in your accounts.

Hope this helps.

[goosegreen]

Re: Tax question

Thanks Tinhips that sounds like very good advise and I will do just that!

Regards

Goose

[Phidom]

Re: Tax question

I’m not sure if the way I finance my van is acceptable from a tax point of view. I purchase, tax, insure and maintain the van out of my personal money but claim the petrol used for business driving as an expense for the business. To my mind, I provide free use of my private vehicle to the business. At the moment I am using an estate car instead of the van. If the vehicle was a business asset, would a car be treated differently to a van. I don’t wan’t the taxman to tell me I have a company car and give me a huge tax bill 😯

[goosegreen]

Re: Tax question

Phidom I have always thought that vans and any type of car is treated differently by the tax man that’s why you see many 4x4s with sign written spare wheel covers or no side windows so they were classed as vans rather than cars also that if you drive a company van you get taxed about £500 pa but if you have a company car it can ad up to most of your tax allowance

goose

[Tinhips]

Re: Tax question

Phidom with your car you are probobly doing right, but also allow some oncosts for the things like wear and tear on tyres and engine. the additional insurance for business use etc.

goosegreen where a van is concerned all expenditure is tax deductable, except private mileage, this assumes you have no other private vehicle.

I understand this all changes next April, but still not sure how it applies to micro businesses that are vehicle dependent.

[Bryan]

Re: Tax question

I do hope all you guys are claiming your capital allowances on the value of any business vehicle.Being self employed and having a vehicle which you also use privately is a totally different tax position to having the use of a company vehicle from an employer.
Reading some of this I think the £300 I pay my accountant each year to make sure Iam claiming all my allowances is money well spent and something you may wish to consider.

Anyway hope this helps and don`t be paying the inland revenue any more than is neccessary by missing capital allowances.

Bryan

[admin]

Re: Tax question

You can either introduce the money as capital, then purchase the vehicle, claiming all costs eg tyres insurance diesel and depreciation (capital allowances) or purchase the vehicle yourself and claim business mileage which is currently 40p per mile for the first 10,000 miles then 25p per mile in any one tax year. Remember if you choose the first way you must make an adjustment for personnal use of the vehicle, ie pro rata costs on a percentage basis. If you were to have a tax inspection the Inland Revenue would want to see some evidence of mileage records to support this!!!
The Inland Revenue run free short courses for the newley self employed where they show you examples of book-keeping and things you can and cannot claim, these are informal and well worth the time!

Cheryl

[ChrisR]

Re: Tax question

Lease it don`t buy it.

You can put all the rentals against your tax bill and you get a new van every three years.

😀 😀

Chris

[andy2]

Re: Tax question

Tinhips wrote:Assuming you are self employed, as opposed to a limited company, you are better to borrow the money off a third party, could be wife/partner, so long as they are not directors, as any of your own money paid into your business, will be seen by inland revenue as income and attract tax.

Make an agreement between yourselves in writting. You can then show the repayments as an out going in your accounts.

Hope this helps.

This is not actually true. Tax is only payable on any profits generated by the business. Any cash (or other asset) that you put into the business is treated as an injection of capital, and is the inverse of drawing capital out (drawings). As long as you can account for the source of the cash there is no problem, if you suddenly produce £5000 in cash Mr taxman might want to know where it came from eg. have you been stuffing the mattress with undeclared earnings.

Any vehicle (including a car) that you declare as an asset of your business will show in your balance sheet and is eligable for full capital allowance and 100{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} tax deductable expenses if used solely for the business. If it is your only vehicle then a proportion (agreed between you and the tax man) will be allocated to private use. This is across the board and even affects the capital allowance, as well as all running expenses. (I claim 15{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} private)

[goosegreen]

Re: Tax question

I thought that you could only claim 25{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} deprieciation a year over 3 years against tax, Not the full purchase price.

Goosegreen

[andy2]

Re: Tax question

Yep – 25{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} / year, but unless things have changed recently there is no three year limit. As long as the asset remains in the business you can continue to claim the 25{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} / annum on the decreasing value.

When the asset is disposed of any difference in the capital allowances account value and the actual value realised (if any) is taken care of by a balancing adjustment on that years accounts.

In the case of a shared business / private vehicle any allowances are reduced by the proportion allocated to private use.

In the earlier post i refered to the balance sheet value but this actually should reflect the true depreciated value of the asset and may not be the same as the value shown in the capital allowances account.

eg. the asset may depreciate by more than 25{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} / year so the true value would be less than seen on the capital allowances account.

[andy2]

Re: Tax question

Forgot to mention – certain vehicles having low CO2 emissions qualify for a higher first year allowance (i think 40{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d}) also some other I.C.T. items are eligable for a 100{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} FYA.

If your vehicle is business asset then ALL expenses tax, MOT, insurance, repairs/mainainance, spare parts, running costs etc can be offset against tax, subject of course to the deduction of a proportion from the total if also used for private motoring.

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