Buying a van and starting a ltd company

[Dicks]

Hi,
Ive been running a small refurbishment business ( as a sole trader) for 3 years. This year, things have taken off and the business has grown considerably.
Ive worked out that by the end of this tax year i will be stumped with a tax bill of approx. £9000.
I plan to buy a van to minimise the tax bill as i need a bigger van anyway. Is it possible to buy the van on finance but offset the invoiced cost of the vehicle??
The next issue i have is that due to the development of the business i will be forming a ltd company. If i were to buy the van as a sole trader (on finance) would this cause any implications when forming the new company in april?? Any help would be muchly appreciated!
Thankyou

[GlobalTaxAdviser]

If you buy the VAN outright or on HP you should be able to claim 100% annual investment allowance which can be offset against taxable profits. If its a finance lease it gets a little complex and you can offset certain costs on an annual basis

You can easily transfer the assets to a limited company but there are longer any tax advantages by creating an asset of goodwill (following the 2014 autumn statement). If your profits are more than 30K then yes I would incorporate.

Please revert if you have any more questions.

[Dicks]

Thanks for that info. Very helpful.
I am not that interested in hire purchase or lease as the monthly payments are just a little more than i wish to manage at the moment. I would be looking at buying a second hand vehicle ouright but using a finance agreement or bank loan to break down the payment into more managable amounts... Does that make sense??
Also, whilst we are on the subject of tax, as a sole trader can i offset subcontractors payments? I use a plasterer quite often and am wondering if i can declare this?
Many thanks.

[GlobalTaxAdviser]

Hi

Thats' fine for claiming AIA and also you can offset any interest payments which is used to finance the VAN

Yes you can offset subcontractor payments and any other payments that related to your business

[superbtaxis]

Hi,
Ive been running a small refurbishment business ( as a sole trader) for 3 years. This year, things have taken off and the business has grown considerably.
Ive worked out that by the end of this tax year i will be stumped with a tax bill of approx. £9000.
I plan to buy a van to minimise the tax bill as i need a bigger van anyway. Is it possible to buy the van on finance but offset the invoiced cost of the vehicle??
The next issue i have is that due to the development of the business i will be forming a ltd company. If i were to buy the van as a sole trader (on finance) would this cause any implications when forming the new company in april?? Any help would be muchly appreciated!
Thankyou

As I understand it, if you buy now (as a Sole trader) then incorporate, you GIVE the van to the Ltd company who then owe you what its worth via a "directors loan account", a new ltd company wont get finance....buy the van on the last day of your tax year and get to offset the cost against your tax bill for the whole year

[superbtaxis]

I thought the tax write off was over 4 years - year 1 40% then 3 x 20%/year

[GlobalTaxAdviser]

AIA would have already been claimed as sole trader. If asset transferred to Ltd company at Market value this will create a balance charge and tax liability - best to transfer asset at Written down value (by making Section 266 election - S266 CAA 2001)