Tax Assist Haywards Heath: What is a van?

Question:

I’m looking at getting a new vehicle for my business and I know there are some tax advantages of having vans. But what is the definition of a van, so that I know what to buy?

Answer:

1. VAT: if your business is VAT registered, you may be able to recover the VAT on a van.

2. Capital Allowances: if you buy the van outright or under a finance lease such as a Hire Purchase agreement, you should be able to offset the cost of the van against your profits. This is because vans are treated as Plant for Capital Allowance purposes, and therefore qualify for the Annual Investment Allowance which allows up to 100% of the cost to be offset in the year of purchase.

3. Benefits in Kind: Company cars can trigger taxable benefits in kind, which are based on the List Price and the car’s CO2 emissions. This can make company cars quite expensive, but benefits in kind for vans are a fixed amount; irrespective of the van’s List Price or CO2 emissions. Furthermore, the rules for when a benefit in kind for a van arises, are more relaxed than those for a car- so a benefit may be avoided altogether.

Defining a van can be tricky, as there are different rules for VAT to those for business taxation, but try to stick to the following conditions:

1. A vehicle that is not commonly used as a private vehicle and is unsuitable for such use.

2. A vehicle primarily suited for the transportation of goods- no rear seats/ windows.

3. Has a maximum legal laden weight of 3,500kg.

Discussing this with an accountant before you make any purchases, could prevent you from losing tax relief and being unable to reclaim VAT. If you would like to discuss your vehicle purchases in more depth, please contact us for a free consultation.