[Dave Willis]

Those of you who are sole traders (not vat registered or limited companies) and purchase your van on a pcp scheme - are there any tax benefits in doing this?
How much is offset against tax? Do you offset the purchase price or can the monthly payments be tax exempt?

Any pointers I'm interested to know.

[darren clarke]

if ur a sole trader everything you spend can be classed as an expense,  as all profit not spent even if left in the company bank account u will get taxed on as if you was payed it

[Smudger]

If you ain't spent it, you can't claim it


Darran

[Dave Willis]

So are either of you two purchasing on pcp's 

[darren clarke]

no i buy cash,   

[mci services]

whats a pcp?

[Dave Willis]

personal contract purchase

A lease really, where you pay a deposit of your choice (up to a third of the value of the vehicle) then pay fixed monthly payments for three years.

At the end of the term you have the option of buying the van with a balloon payment or handing it back and starting again on a new vehicle.

Advantages being that you run around in a new van under warranty and know how much your bills will be. Disadvantage is of course you pay the apr for the privilege and should you be out of work you still need to make the payments.

[Dave Willis]

For example, I could have a new van - put £2500 down and pay £300 a month for three years. Pay another £4000 at the end and the van is mine, or hand it back and start again.

just trying to find out the tax implications. Normally you pay no tax on the initial purchase of your van - have I got that right? Then every year after you are allowed a percentage against the value of the van i believe.

[mci services]

Thanks dave I will ask my brother tomorrow as that is what he does, though he probably doesn't know as he relies on his accountant for everything

[Gav Camm lammy 283]

you can have a 1 off tax deductable thing if say van was 10k
n you paid 10k cash you can off set that full ammount against tax

[mci services]

you can have a 1 off tax deductable thing if say van was 10k
n you paid 10k cash you can off set that full ammount against tax

no you cant thats classed as capital investment and only a % gets deducted and its value reduces each year

[Spruce]

Hi Stu
A PCP is a Personal Contract Purchase and its a personal lease agreement.
See http://www.askaprice.com/buyers-guides/personal-contract-purchase.asp

Hi Dave
You need to talk to your accountant about how such a lease would work for you.

Basically, the saleman will probably not know much, they never did when I was in commercial vehicle sales so can't see it's any different now.
You can claim your monthly payments and VAT on those payments as an expense, as well as your deposit. You can't claim the full purchase price of the van as it is not yours, it is owned by the leasing company. Most then decide what percentage is business use and the remainder being private use for taxation purposes. (Cars and vans are not treated the same with regard to taxation allowances.)
As with any lease, the estimated residual value is what's important and it's based on what the van is expected to be valued at when the contract ends. A van with 45k on a 3 year lease will be a lower value that a van with 36k on the clock on a 3 year lease so the monthly payments will be less as you are leasing the vans depreciation.

But one thing you have to be fully aware of is that you can't just hand the van back at the end of the lease if you don't want it. The van must be in a good condition with fair wear and tear considered. Any damage will be for your account to repair as is the case with any lease vehicle. If you have done a higher mileage than agreed, then the finance house will hammer you with additional leasing charges per extra mile. If you decide to purchase it then you already know what the price is and it doesn't matter what condition its in.

This is a very personal decision. Some people rent (lease) their TV's and never own them, but most of us buy them. Most of us will just laugh as the TV renter as an idiot for paying all that money for nothing. Renting a vehicle can be seen by some in the same light.

I would also suggest you read this as well - look at the disadvantages.
http://www.financeacar.co.uk/car-finance-options/personal-contract-purchase

Using your example - "put £2500 down and pay £300 a month for three years. Pay another £4000 at the end and the van is mine, or hand it back and start again."

Your initial deposit and monthly payments are reflected on your profit and loss account as an expense (loss) as stated. If you decided to buy the van for £4000 at the end of the lease then you would be able to claim that as a capital gains allowance of 40% first year and then 25% on the reduced value each year thereafter.
If you financed the £4000 then other rules apply - you can claim the interest on the loan as well. I think there were changes to the capital allowance write off last year allowing you to claim the full amount one time. ( remember the tax man does not giveth, he always taketh, so any new tax options will probably benefit him rather than you in the long term)

Spruce

[darren clarke]

if it is a van u can decided which way to do it,  either lump sum or over the years, speak to an accountant to see what is best for you

[♠Winp®oClean♠]

you can have a 1 off tax deductable thing if say van was 10k
n you paid 10k cash you can off set that full ammount against tax

no you cant thats classed as capital investment and only a % gets deducted and its value reduces each year

Not now mate, you can use AIA- annual investment allowance. You can now offset the full purchase price of plant & machinery (van) @ 100% in the financial year it was purchased!

OR

You can still write it down as a capitol expense. Circumstances will determine which is best for each business/individual.

[♠Winp®oClean♠]

Just to add-

That's definate if purchased outright, however I'm not sure about leasing etc.

[mci services]

you can have a 1 off tax deductable thing if say van was 10k
n you paid 10k cash you can off set that full ammount against tax

no you cant thats classed as capital investment and only a % gets deducted and its value reduces each year

Not now mate, you can use AIA- annual investment allowance. You can now offset the full purchase price of plant & machinery (van) @ 100% in the financial year it was purchased!

OR

You can still write it down as a capitol expense. Circumstances will determine which is best for each business/individual.

can you elaborate when that came into effect as i bought a van in the last financial year and have to do my tax return soon and the AIA option would be a bonus

[♠Winp®oClean♠]

you can have a 1 off tax deductable thing if say van was 10k
n you paid 10k cash you can off set that full ammount against tax

no you cant thats classed as capital investment and only a % gets deducted and its value reduces each year

Not now mate, you can use AIA- annual investment allowance. You can now offset the full purchase price of plant & machinery (van) @ 100% in the financial year it was purchased!

OR

You can still write it down as a capitol expense. Circumstances will determine which is best for each business/individual.

can you elaborate when that came into effect as i bought a van in the last financial year and have to do my tax return soon and the AIA option would be a bonus

Approx 2 years ago. It had a limit of 50k, then 100k but now it's going (or gone) back down to 50k.

There's a big plus using AIA for anyone claiming tax credits providing their year on year profit hasn't gone up by a similar amount to the van cost.

[mci services]

thanks for that info very helpfull

[Dave Willis]

Thanks Spuce, I've already read most of that and had the conversation at the stealership
where they spew out the usual rubbish.

I haven't spoken to my accountant - I'm not convinced yet. I quite like the idea of being able to hold a fund in reserve and not having too spend all the profits to purchase a van whilst still being able to drive it. I suppose a tax allowance should be available against the total payments for the year but what it is I can't find out.

[Gav Camm lammy 283]

Thanks Spuce, I've already read most of that and had the conversation at the stealership
where they spew out the usual rubbish.

I haven't spoken to my accountant - I'm not convinced yet. I quite like the idea of being able to hold a fund in reserve and not having too spend all the profits to purchase a van whilst still being able to drive it. I suppose a tax allowance should be available against the total payments for the year but what it is I can't find out.

if you need advise m8 towards this a v/gud m8 of mine does
this pcp leasing stuff as his business gary thomas 07802441251
say gav gave you his number or try ian 101 0n ere as he sold cars for a living
prior to becoming a windy , advise is free i believe