Company Van - No personal use

[majamalan]

Hi

I'm the sole owner/director of my Ltd company, with my home address as the registered office address of the LTD company.

My company provides plumbing and heating services at different client addresses.

Upon formation of the company, I asked my accountant whether I should buy a Van through the company or personally? I was advised to purchase the Van personally and I could claim mileage for business use. Now I feel as though that advise may have been wrong, for the following reasons.

1- We have another family car used for personal journeys, and the Van I purchased for my business is merely used for business purposes.
2- Since the company address is my home address, I won't have any dis-allowable mileage for personal use, not even for driving home with it.
3- I'm paying for fuel, car insurance, MOT, road tax, parking and maintenance costs from my taxed income, whereas all of these should be allowable company expenses, which could dramatically reduce my corporation tax.

If I'm correct, can I now sell/transfer the car registration to the company, apply for new insurance through the company and pay for all fuel costs, MOT, road tax, etc. directly by the company and account those as business expenses, which they are?

I look forward to have your insight on this matter please.

Kind regards
M. Ali

[robbob]

Upon formation of the company, I asked my accountant whether I should buy a Van through the company or personally? I was advised to purchase the Van personally and I could claim mileage for business use. Now I feel as though that advise may have been wrong, for the following reasons.

Unless you fully crunch the numbers for both methods yuu don;t know whats best.

eg 10k business miles per year and the mileage you can claim would be £4,500 per year - this could easily exceed the purchase cost and running costs of the van averaged over the length of ownership of that van. It easily could go the other way too.
Your accountant probably should have laid out the two options and let you decide.
Note you may find van insurance via the company is significantly more expensive?

3- I'm paying for fuel, car insurance, MOT, road tax, parking and maintenance costs from my taxed income, whereas all of these should be allowable company expenses, which could dramatically reduce my corporation tax.

Not exactly as the buisness is (or should be if its not !!!) paying you the 45p/25p per mile, so you can still extract cash tax free and claim a deduction for these payments - i am not sure if the accountant may not have explained the replacement claim that exists

If I'm correct, can I now sell/transfer the car registration to the company, apply for new insurance through the company and pay for all fuel costs, MOT, road tax, etc. directly by the company and account those as business expenses, which they are?

I know you said car but did you mean car? thats a whole separate issue cars in the business - generally car benefit is very expensive **- note you can be paid the 45p/25p per mile for car use the same as the van. If you meant van transferring that in is an option and it will likely come in at lower value and not be eligible for annual investment allowance is this is done materially after the van purchase start date - but nothing stopping you go down that route if that makes sense.

** it can be tax efficient to put electric a car or perhaps a newer hybrid car through the buisness if the associated expenses claim exceeds the calculated benefit - average benefit for electic cars (not cats!) over the next 3 years is only 1% of list price. Again some number crunching needed.

[majamalan]

Thank you Robbob for your explanations.

If you meant van transferring that in is an option and it will likely come in at lower value and not be eligible for annual investment allowance is this is done materially after the van purchase start date

Can you please clarify the followings:

• I bought the van second hand in 2018 for £3500. Considering that I'll effectively be selling it to my own company, how will it be valued?
• I don't know much about the annual investment allowance you mention. Can you elaborate on this please? I was thinking that the purchase of the van would add to the company's fixed assets. So that means the company is in a similar financial position (disregarding future depreciation of this asset)
• As I wrote the previous point it occured to me: if the company is making an investment by purchasing a van, then this investment may not be considered an eligible expense. So it'll be taxable, less any investment allowances. Is this what you mean?
• My van will have to be replaced in a year's time because of the new ULEZ regulations. So can I purchase a new van through the company then? How will this impact taxation if I buy a new leased van this time?

Thank you in advance for your support

[bd6759]

As Robbob said, your company gives you 45/25p per mile tax free. You will know if that exceeds the costs you incur. If you don’t know how much it costs you will have no idea if the advice you got was wrong.

Your accountant has presumably done those sums and advised you accordingly. If you think it is wrong, speak with him/her.

Buying a more expensive van, possibly with a lease, is more complicated and more numbers will need crunched. Again, your accountant is the person to ask.

[majamalan]

Can someone please comment on robbob's statement:

If you meant van transferring that in is an option and it will likely come in at lower value and not be eligible for annual investment allowance is this is done materially after the van purchase start date

What does he mean by "not eligible for annual investment allowance"?! Why is it not eligible?

[bd6759]

Because it was bought from a connected person.