Hi Dave,
Its up to you or your accountant to sort your tax out for the taxman.
With regard to PCP. You are renting a vehicle so you are not the registered keeper, the finance house is. So all you can claim back as expenses for that vehicle is the initial deposit, the monthly payments including VAT and all running costs, ie fuel, servicing, insurance etc. less personal usage - usually a percentage.
If you decide to buy the van at the end of the contract then the van is treated as a purchase. At the point to pay your £4000.00 ( your final balloon payment in your first ex yesterday) the van becomes yours and the registration is transfered from the finance house to your name. Even although you have had the van from new, you then become it's second owner, the finance house would be it's first owner. (If you bought a pre - registered van, the dealer is the first owner, the finance house the second and you become the third owner.)
So you have now purchased your van for £4000.00. The tax implication now changes. From the date of purchase (the day you pay your £4000.00), the van now becomes an asset in your business, so you would either write it down at 40% for the first year (Its value would now be £2400.00, claim £1600.00 less personal use) and the following years you would write it down at 25% of its last value (2nd year its new value would be £1800.00, claim £600.00 less personal use) OR you could choose the write the whole £4000.00 off in the first year, but this would depend on your business. If you took out another loan to buy your van for £4000.00, then you are able to claim your interest portion of the finance but not the basic loan repayment - there was a formula available from the Receiver at one time of how you would spread this claim over the period, but I don't know what the regulations are now.
The leasing twist become popular many years ago as it meant that the deposit on a new van was minimal, especially for the VAT registered business. In those days to get finance on a van, the deposit could be around 10 - 20% of the purchase price + the full VAT. A lease allowed that business the put down a smaller deposit, usually 3 rentals in advance, + the VAT on the 3 rentals rather than the VAT on the full amount. It was only after that, that Reg Vardy pioneered the 'buy any vehicle for £99.00 deposit' which also stretched to commercial vehicles. In those days credit was plentiful but interest rates charged were high. HP was then more popular as that is what the dealer sold as he could control the finance rate so he could skim money of the finance portion of the deal as well. With lease deals the vehicles were not financed through the dealerships so they lost out of their cut.
The balloon payment at the end reduced the monthly payments even more, but it came at a 'price'. On HP your monthly payment reduced your risk as you were paying the loan to zero at the end, but with a balloon payment you took more risk on, either directly or indirectly, ie through higher interest rates on the finance portion of the lease and end of contract charges that would come out of the 'woodwork' if you choose the option the hand the van back. For example, a scratch longer than 10mm was not classed as fair wear & tear so they would charge for its repair, ie respray of the panel. They also charged the customer for vehicle vallets and so on, although in virtually all instances the work was never done, as the vehicle went straight to auction. High excess mileage penalities where very good money spinners although an extra 5 or 6 thousand miles meant very little at auction.
Part of the deal was that you would have the van serviced by the dealer when each service was due, it's in the small print. If the service book wasn't stamped to show these services were done, then this kicked in further penalities.
If anyone does go down the road of vehicle leasing, please ensure you get a booklet from the finance house detailing what they class as fair wear and tear, and study it before you sign any documentation.
Spruce
