Your guide to claiming VAT back when buying a used van for business

October 27, 2017 at 4:16 PM

Buying a used van for your business, whether self-employed, a partnership, or a registered limited company can be advantageous to your bottom line. The ability to gain a tax and VAT advantage over the purchase of a business vehicle can mean you are thousands of pounds better off. As with all things related to Her Majesties Revenue and Customs, there are rules to follow, that will help you to pay only for what you need.

Purchasing a vehicle for your business.

When purchasing a vehicle for your business, it is worthwhile considering a range of options before deciding. Some of the factors which should be considered are whether to purchase a van or a car for the business? If it is better to buy outright or to lease? And examining the various VAT and tax advantages of the vehicle choice you are considering, to determine the best situation for the business?

Choosing a light commercial vehicle rather than a car, can have great benefits for your business. HMRC provide a more suitable taxation structure for these types of vehicles, when used for business purposes. This structure is also applicable to used vans, which can make purchasing a pre-loved vehicle a sensible choice.

Taxation Relief on a newly acquired vehicle.

Gaining relief against your taxation liability when buying a vehicle, can be obtained in several ways, depending on your business structure. Gaining relief as a limited company is often easier because of the corporations taxation rules. However, sole trader and partnership structured businesses are also able to claim relief.

Capital Allowance Claims

Using a claim for capital allowance, the full cost of a business van can be claimed against the profits of the business, in its purchase year. However, depreciation factors may lead to a case of deferred taxation.

Value-Added Taxation Refund

If the business purchasing the vehicle is above the value-added taxation threshold, it may be able to claim a refund. When the invoice shows a VAT-able component, and the vehicle was not purchased under the margin scheme, it should be possible to meet the criteria necessary to claim a refund. If the pre-loved commercial vehicle was bought under the second-hand vehicle margin scheme, unfortunately, a refund will not be possible.

Benefit in kind considerations

When a business vehicle is used for personal use, a benefit in kind allowance must also be considered. The benefit in kind allowance is processed differently for specific business types. It can affect personal vehicle usage, and personal fuel usage. Limited companies process the benefit in kind allowance, and are also required to process National Insurance contributions on the benefit. Self-employed and partnership businesses process their benefit in kind through personal income tax or by restrictions on their capital allowance claims.

Used vans are acceptable to HMRC for benefit in kind allowances when they meet certain specifications. Some light commercial vehicles are not acceptable.

Disclaimer: Always seek advice from a professionally qualified accountant if you are unsure of your liability.

Category: Buying Guide

Back to all Blogs