Introducing a Hire Purchase car to a business

Sole Trader Accounting

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Having made the decision to go self employed on a full time basis, I'm due to start my new role as a self employed book keeper/ company accountant for a businessman who owns a few small business' in the next few weeks.

I'm all set up myself with HMRC etc, and have done self assessment for sole traders and partnerships on the side whilst I have previously been working for corporate organisations in Management Accounts.

However, I'm unsure of what to do with regards to introducing my Hire Purchase car to my accounts, where I will be using for 70% business if I go down the full cost route. It's a conundrum, if I'm being honest and I'm now overthinking! My HP is due to come to an end in January 2019 where I pay the remaining balance or hand back - although the capital will have been repaid by January 2018, allowing me to either purchase/ upgrade etc then. The HP is over 4 years and began in February 2015.

Any advice/ pointers would be helpful?

Mark

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RLI
By lionofludesch
08th Nov 2017 16:38

Your accountant should be the person you should be talking to about this. The options are numerous.

However - your HP is about loans, not motor expenses.

The interest isn't part of the 45p/25p a mile, if I can infer your thoughts from what you omit to say.

You can claim 70% of the interest, if that turns out to be your your business use (you're predicting the future here). The snag is that this might not be as much as you thought. The interest is highest at the start when the balance is highest. You're now over 2½ years into the agreement and the interest charge going forward will be relatively small.

Excel has loads of spreadsheets which will calculate the loan interest content of your repayments for you.

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Replying to lionofludesch:
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By Mark_86
08th Nov 2017 19:54

Thanks lionofludesch. I’ve been trying to get my head around the accounting treatment for Hire Purchase without using the mileage expense. I’ve studied AAT but this is over my head! :)

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