One of the most popular questions we get asked by our clients is, “What is the most tax efficient way for me to get a new van or car for my business?” On it’s own this is a difficult question to answer, because ultimately, the route taken needs to be in the best commercial interests of the business, and then the tax efficiency can be considered after.
Other considerations include, if a company is purchasing the vehicle, who will be using it, will there be any private usage, and if so, what are the benefit in kind implications?
What are the main options?
Finance Lease – which is a lease that transfers substantially all the risks and rewards of ownership of an asset to the lessee.
Hire Purchase – a method of buying the vehicle through making installment payments over time.
Contract Hire – an alternative to buying a vehicle outright – contract hire allows you to lease the vehicle over a set period before returning it to the lease company.
Benefits and Key Features
We have teamed up with Andy Carey from Vans Express, based in Sutton, who has outlined the benefits and key features of the different finance options:
Finance Lease:
- The full cost of the vehicle is tax deductible via capital allowances
- Low Deposit – Minimum equivalent of just three monthly payments up front
- Fixed Monthly Rental
- Possibility of larger end payment, to further reduce monthly payment
- No mileage or damage restrictions
- At end of term, either sell vehicle and keep 99% of profit, or extend the lease for a nominal amount
Hire Purchase:
- 100% tax relief on interest charges
- Fixed monthly rental
- Terms from 12 to 60 months
- No mileage or damage restrictions
- Cost of vehicle can be offset against taxable profits
- Own the vehicle outright at end of term
- No VAT added to the monthly payments
Contract Hire:
- Low deposit
- Fixed monthly rentals
- 100% tax deductible
- Customer not at risk if vehicle depreciates
- Contract terms from 12 months to 60 months
- Maintenance Package available
- Hand vehicle back at end of contract
Note: The above benefits and key features are those offered by Vans Express and may not necessarily apply for to all companies offering the same service.
For further impartial advice on your vehicle requirements, Andy will be happy to help, visit www.vansexpress.co.uk for contact details.
Once you have decided which solution suits you and your business best, please feel free to contact us and we can guide you through the tax aspects.
DG Accountancy Services Limited has Professional Indemnity Insurance with AXA Insurance – Policy Number PQ0586469.
