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