Aaz Posted November 30, 2013 Report Share Posted November 30, 2013 Gents I'm looking to purchase a new L200 on business finance lease deal, I'm vat registered, I don't quite understand the 100% taxable part, the vehicle is only for business? Does this mean that I can offset the monthly repayments against my tax bill, I'm ltd so it's corporation tax, or does this mean that taxable profits would reduce by X amount, I'm completely confused with this and no matter how many times I google it I can't find an easy answer! If my tax bill was say 10k and the vehicle rentals were 4k is my tax reduced to 6k or would I just not pay 20% tax on the 4k? My accountants away at the moment so I'd thought I'd ask you guys here for some advice. Thanks Aaz Quote Link to comment Share on other sites More sharing options...
sitsinhedges Posted November 30, 2013 Report Share Posted November 30, 2013 Not pay 20% on the 4k or folk would just keep leasing new vans and never pay any tax. Quote Link to comment Share on other sites More sharing options...
sitsinhedges Posted November 30, 2013 Report Share Posted November 30, 2013 The 100% taxable part probably refers to the fact that if you buy a van for cash you only offset a yearly amount against depreciation, say 20% and the next year 20% of the remaining value etc whereas if you have it as a lease you're effectively renting it so the whole cost can be put against each tax year because it isn't an asset that retains any value to carry forward into subsequent years and the company will never own any of it. I think Quote Link to comment Share on other sites More sharing options...
Dirty Harry Posted November 30, 2013 Report Share Posted November 30, 2013 My Mrs is a chartered accountant and she says if your buying it and at the end if the lease it will be yours you get 100% of the tax relief on day one through capital allowances but if at the end of the lease it gets handed back then you get 100% tax relief on the monthly payments. Quote Link to comment Share on other sites More sharing options...
Aaz Posted November 30, 2013 Author Report Share Posted November 30, 2013 My Mrs is a chartered accountant and she says if your buying it and at the end if the lease it will be yours you get 100% of the tax relief on day one through capital allowances but if at the end of the lease it gets handed back then you get 100% tax relief on the monthly payments. Thanks for this but what does it mean in lay men's terms? And yes at the end of lease it will be owned by business or traded in for a new one The 100% taxable part probably refers to the fact that if you buy a van for cash you only offset a yearly amount against depreciation, say 20% and the next year 20% of the remaining value etc whereas if you have it as a lease you're effectively renting it so the whole cost can be put against each tax year because it isn't an asset that retains any value to carry forward into subsequent years and the company will never own any of it. I think I'm more confused now than before Quote Link to comment Share on other sites More sharing options...
Dirty Harry Posted November 30, 2013 Report Share Posted November 30, 2013 Thanks for this but what does it mean in lay men's terms? And yes at the end of lease it will be owned by business or traded in for a new one. If it's for business use only it gets treated the same as any other fixed asset, tractor, wheelbarrow or anything like that. You get 100% of the tax back on the purchase price. I don't understand it all either but I don't have to. I suggest you wait until your accountant gets back if this still does not make sense. Quote Link to comment Share on other sites More sharing options...
sitsinhedges Posted November 30, 2013 Report Share Posted November 30, 2013 Thanks for this but what does it mean in lay men's terms? And yes at the end of lease it will be owned by business or traded in for a new one I'm more confused now than before Listen to the accountants hubby. I always buy my vans outright and get a yearly depreciation offset against that money, that way I get several years for free compared to a lease that is basically rental with no asset at the end. Sounds like you're looking to lease buy if you have a van at the end of the lease. Quote Link to comment Share on other sites More sharing options...
Rupert Posted November 30, 2013 Report Share Posted November 30, 2013 if rental is 300,then 300 is 100% allowable against tax AT the rate at which its due.So if tax is 20% then yos save 20% of 300 =£60 in tax per rental due, If you settle the rental in year 2 and get a new truck you get the settlement allowable as well. Quote Link to comment Share on other sites More sharing options...
sitsinhedges Posted November 30, 2013 Report Share Posted November 30, 2013 If it's for business use only it gets treated the same as any other fixed asset, tractor, wheelbarrow or anything like that. You get 100% of the tax back on the purchase price. I don't understand it all either but I don't have to. I suggest you wait until your accountant gets back if this still does not make sense. It's my understanding that you don't get all the value of any item in one tax year if it's expected to last for more than that year. My accounts show fixed assets with incremental depreciation year on year. I'm still getting a proportion of the remaining value of my van every year even though it was paid for in full five years ago. Leases probably work differently but always seemed poor value to me. Quote Link to comment Share on other sites More sharing options...
Dirty Harry Posted November 30, 2013 Report Share Posted November 30, 2013 Tax write down on assets and accounts write down on assets i.e. depreciation are different. HMRC currently allows 100% tax relief on the first £250,000 of qualifying capital expenditure known as the annual investment allowance. Quote Link to comment Share on other sites More sharing options...
Aaz Posted December 1, 2013 Author Report Share Posted December 1, 2013 Thanks for the advice gents and lady of course, so in effect the rental becomes a cost of sales and is deducted from gross profit? Think I will wait until my accountants back in the office Quote Link to comment Share on other sites More sharing options...
pegasus bridge Posted December 1, 2013 Report Share Posted December 1, 2013 (edited) It would be worth asking the accountant to look at finance lease against operating lease or contract hire. The emotive idea of having an asset at the end might not be worth doing. Vehicles just lose money, you just want the most efficient way to do this over the life of the vehicle. Letting someone else take the RV risk, and taking depreciating assets 'off book' may be far more advantageous for you . Edited December 1, 2013 by pegasus bridge Quote Link to comment Share on other sites More sharing options...
Aaz Posted December 1, 2013 Author Report Share Posted December 1, 2013 It would be worth asking the accountant to look at finance lease against operating lease or contract hire. The emotive idea of having an asset at the end might not be worth doing. Vehicles just lose money, you just want the most efficient way to do this over the life of the vehicle. Letting someone else take the RV risk, and taking depreciating assets 'off book' may be far more advantageous for you . I did consider contract hire but was put it of by the potential 'fines' if the dealer considers anything other than far and wear to be payable and the restrictions on the mileage. Its a bit of a minefield, this rate I'll stick with me 23yr old Paj! Quote Link to comment Share on other sites More sharing options...
pegasus bridge Posted December 1, 2013 Report Share Posted December 1, 2013 (edited) Fair wear and tear can be a minefield , most contract hire or rental business's stick to a guide produced by the BVRLA which is pretty reasonable for commercials. The real pain is where some define wear and tear themselves ( as part of their t's and c's) at the start and allow very little in terms of wear and tear - avoid these like the plague, they might be super cheap - but they build into cost a very optimistic RV on the basis it will be in virtually brand new condition in 3 years time! Edited December 1, 2013 by pegasus bridge Quote Link to comment Share on other sites More sharing options...
Rupert Posted December 1, 2013 Report Share Posted December 1, 2013 Finance lease is the best idea.Just ordered a new van and rates are unbelievably low,if it have a good residual value all the better. This is for the user who is in a cycle of regular changes.If you want to keep it years beyond the agreement then traditional Hp is the way forward. Quote Link to comment Share on other sites More sharing options...
pegasus bridge Posted December 1, 2013 Report Share Posted December 1, 2013 Finance lease is the best idea.Just ordered a new van and rates are unbelievably low,if it have a good residual value all the better. This is for the user who is in a cycle of regular changes.If you want to keep it years beyond the agreement then traditional Hp is the way forward. That very much depends! Quote Link to comment Share on other sites More sharing options...
four-wheel-drive Posted December 1, 2013 Report Share Posted December 1, 2013 Gents I'm looking to purchase a new L200 on business finance lease deal, I'm vat registered, I don't quite understand the 100% taxable part, the vehicle is only for business? Does this mean that I can offset the monthly repayments against my tax bill, I'm ltd so it's corporation tax, or does this mean that taxable profits would reduce by X amount, I'm completely confused with this and no matter how many times I google it I can't find an easy answer! If my tax bill was say 10k and the vehicle rentals were 4k is my tax reduced to 6k or would I just not pay 20% tax on the 4k? My accountants away at the moment so I'd thought I'd ask you guys here for some advice. Thanks Aaz What is the rush I would just hang on a bit and get your accountants to go through it with you when he/she gets back you will feel a right fool if you get one only to be told at a latter date that you could have saved a money by doing it another way. Quote Link to comment Share on other sites More sharing options...
Aaz Posted December 1, 2013 Author Report Share Posted December 1, 2013 What is the rush I would just hang on a bit and get your accountants to go through it with you when he/she gets back you will feel a right fool if you get one only to be told at a latter date that you could have saved a money by doing it another way. Theres no immediate rush so to speak, just trying to fathom it all out as sat watching Saturday night tv looking hmrc's website was getting a tad tedious so thought I'd on here - you never know your luck Quote Link to comment Share on other sites More sharing options...
four-wheel-drive Posted December 1, 2013 Report Share Posted December 1, 2013 (edited) Theres no immediate rush so to speak, just trying to fathom it all out as sat watching Saturday night tv looking hmrc's website was getting a tad tedious so thought I'd on here - you never know your luck Fair enough there its always worth asking about someone may put you on to something good and you can still talk to your accountant about it later also if its a work truck or van and you intend to change it every two or three years you do not really need to own it just lease it sounds good to me. Edited December 1, 2013 by four-wheel-drive Quote Link to comment Share on other sites More sharing options...
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