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Van expenses

Van expenses

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I have a client who has both a Ltd company and a sole trader business. I only deal with the ltd company. He personally owns a van and is wanting to charge the ltd company a rental fee for using it. He then also wants to claim the mileage via petrol receipts. His mileage is varied, but fairly high over the year. I have discussed the various options with him, but this is his favoured route. I am now questioning myself as to what the benefits are for him, as this is a cost to the business, but an income to his self employment. Am I missing something or just having one of those days ;-)

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By Adam12345
26th Apr 2016 16:13

Probably not a good idea if their self-employment profits are above the personal allowance as the rent charged will save 20% corporation tax but the rental profits in the self-employed business he will pay 20% income tax and 9% Class 4 NI. 

But ultimately he should split the costs on a proportionate basis.

It's hard to elaborate further without more information.

 

 

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RLI
By lionofludesch
26th Apr 2016 16:33

Marginal rates

I agree.  Prima facie, it's a carp idea.  But the numbers might suggest differently.

VAT may or may not be a problem.  You don't say whether either entity is registered.

Tell him that, overall, it'll cost him 9% of his rental fees and it'll be surprising how quickly he loses interest.

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By jam2
27th Apr 2016 11:28

Thanks - my thoughts exactly. I'll put it to him again and see what he comes up with. Yes he's Vat registered for the Ltd company, but not the sole trader as far as I'm aware. He deals with the soletrader accounts himself, along with payroll,Vat for the Ltd company and self assessment. This is my first year with him, so we'll see how it goes.

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RLI
By lionofludesch
27th Apr 2016 11:42

Loses

So he loses the VAT on fuel and repairs.

Another nail in the coffin of his bright idea.

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