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Can I write off 100% of the cost of a van?

Can I write off 100% of the cost a newly purchased used van from my profits?

Hi, I am confused!

My turnover over the last 4 years is low - £11 -13k a year, after expenses, about £7k. I have been using my campervan to carry out my business as a surveyor part-time and claiming the flat rate 45p a mile as an expense.

The campervan is 24 years old and is in the garage and needs about £1200 spending on it (its worth more than that and is a bit of a collectors piece) so I will be putting it into semi-retirement strictly for shopping and holidays only now to extend it's life. It is also expensive on fuel.

I plan to buy a small van for about £5000 outright. I have seen HMRC website saying that I can claim 100% as AIA as it's plant/machinary and must keep receipts for all expenses covering it. I then can claim that off my profits for this year. I have had extra work in this year and my turnover is about £17k. If I can deduct the £5k plus insurance, tax etc (with my other expenses), this will keep me below the tax threshold. This is my aim.

I phoned HMRC who were a bit fuzzy and said that I have to do the Writing Down Allowance of 8% a year instead (as its not a new van). This would mean that my personal allowance would be exceeded and so in effect I would be paying tax on the unwritten down portion of the van purchase at 20%. This can't be right surely? Everywhere I look it seems to say that I can exempt 100% of the cost especially as I am working with cash basis accounting so its an expense incurred this tax year.

I would be paying out £1500 or something in tax this year, whereas if I leased or hired a van for a while, I could remain under the personal allowance which seems a daft waste of money to me,

Can someone please help and clarify? I am new to self-employment.

Thank you

T

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avatar
07th Dec 2018 09:39

Probably best you engage an accountant.
The cash basis may not be the most suitable for your circumstances.
Only call HMRC if you want little more than a layman's advice.

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07th Dec 2018 09:57

If you're on cash accounting, you must claim the cost of the van, whether it saves you tax or not. It's a well known cash accounting trap. You need to switch back to accruals accounting.

The advice from HMRC illustrates the dangers of taking advice from HMRC. The van just has to be new to you, not new straight out of the showroom, to claim AIA. (And even if you couldn't claim AIA, the correct rate is 18%, not 8%.)

You don't need to claim the whole £5000 - if £2000 reduces your tax bill to zero, that's all you need to claim. You can keep the other £3000 for later - at 18% a year. Whether you should keep claiming to reduce your Class 4 NI to zero is a moot point. Some say yes, some say no. It's your choice.

Either get an accountant or be prepared for a lot of research.

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07th Dec 2018 10:07

Providing it is a van as defined by HMRC, you've purchased it and its is new to your business then it qualifies for AIA. There is nothing in the guidance that says it has to be brand new. No idea why HMRC thought it was a capital allowance write down. You should contact a local accountant who will be able to help you with your accounts rather than relying on HMRC.

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to lesley.barnes
07th Dec 2018 10:12

lesley.barnes wrote:
No idea why HMRC thought it was a capital allowance write down.

I'm tipping they thought it was a car. With a lot of CO2 - hence the 8% rate.

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07th Dec 2018 10:30

Tax advice from HMRC is worth every penny it costs.

They will either make something up, read a webpage you could have found on your own or, most egregiously, give you wrong information to increase your tax bill.

"Public Servants" is a complete misnomer, they serve the treasury and don't give a toss about the public.

That said, you've got most of the advice you need on this one point already, I would just add that seeking a local accountant to help you out will pay for itself in short order.

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to Duggimon
07th Dec 2018 17:49

Duggimon wrote:

Tax advice from HMRC is worth every penny it costs.

That's my line.

Except I use it about Any Answers.

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07th Dec 2018 12:04

My friend we have a tax regime designated ' self assessment " which gives you leave to exercise your own agency, your selfhood, your very essence of fiscal thinking and fiscal execution. Trust me there is no such thing as an 'expert' in todays realm of modernity.
Deduct a quantum of AIA to reduce your profits to the Personal allowance threshold then put the balance in a main pool and apply 18 per cent of the balance for next year.
You yourself have latent dormant fiscal neurons to exercise. Flaunt your new fiscal identity

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By Jdopus
to Mrbailey
07th Dec 2018 13:10

No such thing as an expert? That's a bit of a bold claim to make on a forum populated by professional advisers.

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By DJKL
to Jdopus
07th Dec 2018 16:47

It's in the spirit of Brexit.

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07th Dec 2018 12:16

I trust you will produce figures on an accruals basis as opposed to cash in and cash out shake it all about basis. The accruals basis affords you to invoke the capital allowances procedures. AIA up to £200.000 limit and then 18 per cent write down claim..on balance.

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07th Dec 2018 12:22

Please note Phil has increased the AIA threshold to £1 million. He wants more investment.

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By Tornado
to Mrbailey
07th Dec 2018 15:22

"Please note Phil has increased the AIA threshold to £1 million. He wants more investment."

That should cover a new van.

I heard of someone who interpreted the rules his own way .... claim total cost of van in year of purchase plus 18% WDA. I did not get any further than that, but perhaps 18% each year for ever.

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07th Dec 2018 17:59

Well thank you everyone for your various stances on my issue.

I am buoyed up by the fact that HMRC are as I had suspected when last year I asked them the same question and was told that I could purchase a van under £10k on "expenses" and still take the 45p a mile. I didn't think this was right so didn't go ahead.

I shall follow the money and go for partial AIA for this year and wrote down the remainder above my personal allowance.

Now the challenge of finding a proper van with windows. It'll be a mobile office plus to transport step ladder and 6ft camera pole (hence a car isn't big enough). I am not spending 4 hrs a day on my laptop in the back of a dark, dank van. Its the modern age but not in HMRC-Land it isn't it seems.

Thank you for your comments/advice.

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to terry507
07th Dec 2018 19:09

terry507 wrote:

Now the challenge of finding a proper van with windows. It'll be a mobile office plus to transport .................

Which may well be classed as a car for AIA if you are not careful.
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to Wanderer
07th Dec 2018 19:49

I think the OP knows of that risk.

One point that might be worth making, as I don't see it above, is that the simplified claim (45ppm etc) that the OP is used to is incompatible with CAs.

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to Tax Dragon
07th Dec 2018 22:02

I'm not sure he does know.

That might well be the reason HMRC were quoting him that 8% rate.

As Joe Friday used to say "Just give me the facts, sir, just the facts."

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to Tax Dragon
08th Dec 2018 05:57

Tax Dragon wrote:

I think the OP knows of that risk.

Nothing I can see to suggest he does. And of course if one is not aware of the rules if is VERY easy to be tripped up. Particularly when the OP mentions windows and the fact it'll be set up as a mobile office.
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07th Dec 2018 23:06

I would just record all receipts for van running costs and fuel not the 45p a mile. I have learnt that as I tend to hang onto vehicles probably longer than I should, the repairs cost grows so the 45p a mile is not worth it eventually if you do a life-cycle cost exercise. It depends on how much is saved overall.

When I started up 5 years ago, I sent to HMRC all my set up cost invoices: laptop, equipment, home office costs all as expenses (apportioned for private use where necessary at 30% for private use) and asked them check and advise. It was a massive bundle of paperwork of all my household costs over the 3 years before start up and the new increases in costs. They accepted these and so all expenditures for the business I put down as expenses (not the seperate sections) and have continued in this vein ever since. Well, my argument is "this is cash-basis so here's the numbers of monies in/out". It works for me. Spreadsheets are my friends! Hopefully ...

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avatar
07th Dec 2018 23:06

I would just record all receipts for van running costs and fuel not the 45p a mile. I have learnt that as I tend to hang onto vehicles probably longer than I should, the repairs cost grows so the 45p a mile is not worth it eventually if you do a life-cycle cost exercise. It depends on how much is saved overall.

When I started up 5 years ago, I sent to HMRC all my set up cost invoices: laptop, equipment, home office costs all as expenses (apportioned for private use where necessary at 30% for private use) and asked them check and advise. It was a massive bundle of paperwork of all my household costs over the 3 years before start up and the new increases in costs. They accepted these and so all expenditures for the business I put down as expenses (not the seperate sections) and have continued in this vein ever since. Well, my argument is "this is cash-basis so here's the numbers of monies in/out". It works for me. Spreadsheets are my friends! Hopefully ...

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to terry507
08th Dec 2018 09:39

It's clear from your post that you know best, terry.

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08th Dec 2018 09:22

You need to make sure that what you are purchasing really is a van in Hmrc opinion. You start mentioning putting windows in and it being a mobile office it is beginning to sound like a camper van. This probably why Hmrc have told you it isn't AIA and to use capital allowances. As for using a cash in cash out basis you can't chose to claim only part of the costs for AIA as it suits.

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