Van in limited company

Van in limited company

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I set up a brand new limited company for a client who is a plumber and just doing end of year accounts.  Prior to this he was in partnership with someone (which ceased) and had a van on contract hire with a primary period of rental and there is a large final rental.  He then plans to sell the van to a friend at market value who will then sell it back to him so he can retain it.  

The first 30 payments went through the partnership and the payment now comes out of the limited company bank account.  The van is used every day in the limited company but from a tax point of view can I show the rentals as an expense in the limited company and get tax relief on them even though the agreement is in the partnership name or does this have to go against directors loan account?  

He's based at home and there is no personal use of the van other than travel from home to the customer.  The company has spent £9k on fuel and related motor expenses all of which are business related and it seems silly to treat the van as personal and put all this fuel to his loan account and request mileage claims when it's all business.

Any comments appreciated on the best way to deal with both the hire payments and the fuel?  Thanks

Replies (6)

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By Marion Hayes
18th Jul 2015 11:38

Duplicate question?

I thought this question was asked the other day - not capable of transfer to Company.

All payments in respect of this van represent payments of a pecuniary liability and should go through payroll.

I am also wary of artificial transactions.

Silly? I think that is not a considered response. Tax law is what it is.

In addition, if the van did belong to the company you would also have a van and a fuel benefit. It is obviously capable of private use and the company has paid for the fuel.

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By johngroganjga
18th Jul 2015 14:33

Yes but he can hire the van to the company in the meantime, and then, when it is his to sell, sell it to the company. The idea of selling it to the company through an intermediary is pointless nonsense.

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By Marion Hayes
18th Jul 2015 17:24

Agreed John

but wouldn't it be simpler just to claim mileage?

I assumed the inclusion of the friend was to try for AIA which is why I mentioned artificial transactions

Thanks (2)
RLI
By lionofludesch
18th Jul 2015 18:27

Looking for Trouble

I wuldn't look for trouble.  I'd see out this period of ownership with mileage allowance claims, as Marion suggests.

What's the projected MV of the van at the end of the contract ?

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By LP27
18th Jul 2015 21:25

The inclusion of the friend was because the contract hire company states it must be that way in the agreement and the van is sign written so he wants to retain it.  Having claimed tax relief on the rentals in the partnership and the possibility of claiming the remaining rentals in the limited company, I would play safe and not claim AIA if he then buys it from his friend.  

However is renting the van from himself (the partnership) likely to be argued by HMRC if there is a contract hire document to back up the charge?  If so then as suggested maybe its best all the fuel and rental payments go to directors loan.  I could ask him to use his work diaries to work out the mileage, but even with him doing 26000 miles a year travelling to London and back it won't cover the total costs he has suffered for fuel/maintenance and rentals and so he will be out of pocket and lose tax relief.

Regarding the private fuel, yes it is capable of private use but the reality is that he has a car as well and from what I understand, insignificant private journeys in vans in particular are exempt if he did make a detour to pick up some milk on his way home.

The van is expected to be worth £4500, the total monthly rentals paid in total amount to just over £14k plus the final rental of £3250.

Thanks

 

 

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RLI
By lionofludesch
20th Jul 2015 11:41

Winging it

Not really worth winging it, then, to try and claim AIA - even on the basis of full disclosure.

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