Property & Construction

The company van conundrum; what are your options?

Most construction firms or property developers require vans to get their workforce and equipment on site.  In an everchanging world, it can often be difficult to get to grips with whether it’s best to lease or buy these vehicles.

It’s also essential that the van actually qualifies as a van for tax purposes according to HMRC’s criteria (or you could end up paying more tax than you need to pay). The dealer you acquire your van from should be able to confirm this, but make sure you have certainty here.  Basically, if it isn’t a van, then it’s a car and, unless it has very low emissions then it won’t be worthwhile buying this through your company.

Another consideration to factor in revolves around whether you are a sole trader or a limited company.

1st September 2020

What routes are available?

Outright purchase, without any lending, will secure the opportunity to obtain tax relief on the full value of the vehicle at the point of purchase.  However, this clearly puts a dent in your cash flow at the outset of ownership.  In the current economic climate, where many businesses have had to keep a close eye on their day-to-day finances, that may not be desirable.

Renting a vehicle can, therefore, often be considered a better alternative as the cash outflow is matched to the period over which you use the vehicle in your business. However, the tax position here is not as advantageous as you obtain tax relief on each rental payment as it’s paid, rather than on the value of the vehicle itself.

You may wish to consider some form of Hire Purchase arrangement where substantially all of the vehicle’s value is paid over the term of the lease arrangement.  Providing certain criteria are met, such an arrangement would be treated as if you purchased the vehicle outright, but effectively with a loan attached. This brings with it the benefit of being able to claim tax relief up-front on the full value of the vehicle, whilst spreading the cash outflows over the period of the lease.  So potentially the best of both worlds!

Administration and record keeping

Whether you’re buying a van through your company 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, to support the tax stance you have chosen to take.

In addition, there are other considerations to be made, such as maintenance and upkeep of the vehicles.  If you’re like most other owner managers then you will probably prefer to focus on what you know best – i.e. running your business – rather than becoming a vehicle fleet manager, so outright ownership in any guise and responsibility for repairs, or even recovery from the hard-shoulder late one evening, may simply be a hassle you’d rather avoid.

So, whether buying a van through your company is a good idea, or assessing the means of financing a vehicle, depends on current legislation and your personal circumstances – so it’s sensible to always talk to your adviser first before deciding which route to go down.

For further information contact Stuart Grimster or click here…