What to think about when buying a new work vehicle 🚚
Updated: Sep 9, 2022
Here are some things to think about if you're buying a new work van:
How to get the best value for money?
The best value deals are usually found by buying as follows (best value listed first):
Cash / outright purchase
Finance via third-party loan (usually bank loan)
Finance via Hire Purchase (usually arranged by the vehicle dealer)
Lease (you never own the vehicle)
How to get the most tax relief?
Presuming you're buying a van, that will not be used personally, then all the above methods of purchase will allow you to set the full cost of the van against your profits. The difference is in timing.
Purchasing via cash, loan or Hire Purchase (options 1 - 3) means that the business can claim Annual Investment Allowance and offset the whole purchase price against taxable profits in the year of purchase (even if repayments are spread over several years). This is usually considered preferable.
Leasing a vehicle (option 4) means that tax relief is spread throughout the lease agreement - usually several years.
Get the paperwork right
Sole-traders and Partnerships can purchase the vehicle in the name of the proprietor or Partners. However, limited companies must ensure the following paperwork is made out in the name of the company (not its director):
Loan / Hire Purchase or lease agreement and accompanying Direct Debit agreement
V5C (vehicle log book) is best in the company name, but it's legally possible to name an individual as the "registered keeper" on behalf of the company
Buying a new vehicle is always a significant decision - be sure to let your accountant know if you've any questions.
Would you like help to pay less tax? Feel free to get in-touch or check-out our related posts 👇