Hi, I am due to prepare an income tax return for 2013/14 on behalf of a friend.
He is currently looking at bringing in a vehicle for use within his Sole Trader business and has been advised that perhaps Vehicle Leasing may be the most appropriate method for him.
The question he has asked is how much of the payment he can offset against his profits from self employment?
He has suggested a couple of commercial vehicles - a Nissan Navarro and L200, but may also just settle for a regular car dependant upon the relief he will be entitled to.
It is estimated currently that the split of the vehicle use will be roughly 50/50 business and private. He is not VAT registered.
As far as I can see it - if he chooses the Vehicle Leasing option then he will be able to offset 50% of the leasing costs if the vehicle has CO2 emissions of 130gkm or less. If he chooses a vehicle with > 130gkm emissions then regardless of whether this is a commercial vehicle or not then he can only claim 85% x 50% = 42.5% of the leasing costs as an allowable deduction against his taxable income.
Can anyone please confirm that I have got this correct?
Furthermore, if he does choose the Vehicle Leasing option then presumably all other expenses for said vehicle will need to be claimed on a % basis (ie 50% of the total spent on insurance, road tax, fuel etc). He will not also be able to claim 45p per business mile as well as the 42.5% of the leasing costs.
Again, can someone please clarify that my assumption is correct.
Many thanks in advance for your help.
Froth
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I agree with most of what you've written
However, the 15% leasing restriction doesn't apply to commercial vehicles.
It's worth crunching some numbers through and seeing whether your friend will be better off simply claiming the 45p per mile.
The other thing to consider if the vehicle is a commercial vehicle, if he were to purchase it on a hire purchase/lease purchase deal, he could claim AIA's as commercial vehicles class as plant. You would also be able to claim tax relief on the interest. However AIA's and interest would also need to be adjusted for private use.