Buying a van through your company

Unlike buying a car through your limited company, buying a van can be quite tax effective.

So what do you need to be aware of?

Is it a van?

Well, 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 here.

Administration

Whether you buy the van 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.  However as only a percentage of the van's cost will be allowed in the accounts as depreciation, this will invariably lead to a deferred tax charge in the company's accounts.

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.

Personal tax

If you use the van for personal use, you will be liable to a benefit in kind charge on the personal usage - currently £3170 for the 2016-17 tax year.  That means if you are a higher rate taxpayer you will incur an income tax charge of £1268 - £3170*40%.

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 - currently £598 for the 2016-17 tax year.  Again, if you are a higher rate taxpayer you will have income tax to pay of £239.20 - £598 * 40%.

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 2016-17 tax year.  So the company will have to pay Class 1a of £520 (£3170+£598 = £3768 * 13.8%).  

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 here.

However be aware that whether buying a van through your company is a good idea depends on current legislation and your personal circumstances - so always make sure you talk to your accountant before deciding what to do.

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Why Friendly

The Friendly Accountants are Alternative Accountants. Unlike traditional accountants, we look forward - not back.

We work with small businesses and contractors/freelancers who want to embrace the world of online software and the benefits this brings.

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We're a husband and wife team with over 50 years experience of working with small businesses.

So we're in a unique position to understand the challenges that you face every day in your business.

And what's more, we're fully professionally qualified so you can be sure that your affairs are in safe hands.

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