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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hello, hope you can help. I have a small business and I register

Customer Question

Hello, hope you can help. I have a small business and I register my income and expenses as a self employed person each year, in addition to my permanent full time job. Last year I bought a pick-up, insured as a commercial van. I use 70% of this for the self-employed business. Can I expense 70% of the purchase price, tax and service costs for last year? and do I need to write to HMRC to inform them of a change in accounting? Previously I used my personal car which had been paid for in full and so I expensed the diesel and running costs accordingly. Thanks
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Assuming the vehicle is accepted by HMRC as a van (see here and here), you can claim tax relief for the van by one of the following methods:

1 You can claim the mileage allowance at the rate of 45p per mile for the first 10,000 business miles and 25p per mile for each subsequent business mile. This would preclude you from claiming for any of the running costs of the van apart from loan interest, parking fees and road toll fees. You can only use this method if your annual business turnover is less than the VAT registration threshold when you first use the van. Take a look here for more information.

2 You can claim capital allowances. Take a look here for information on capital allowances on plant and machinery.

ANNUAL INVESTMENT ALLOWANCES

You could write off the full cost of the van against one year's income under the Annual Investment Allowance rules. If you claimed AIA for the full cost of a van costing £10,000 for example and sold it for, say £6,000, in a later year, there would be a claw back of £6,000 of the allowances you were given in the year of purchase as you only get capital allowances for the net cost of an asset (£10,000 - £4,000 in this example). That may increase your tax liability in a later year.

WRITING DOWN ALLOWANCES

You could claim a lower AIA with the balance of the cost going into your plant and machinery pool on which you would claim annual writing down allowances at 18% of the reducing balance. Alternatively, you might choose to claim no AIA and claim writing down allowances on the full cost of the van at 18% per annum on the reducing balance of the pool value.

Whichever type of capital allowance claim you make, you must disallow a proportion if there is any private use of the van. Once you choose a method of claiming, mileage allowance or capital allowances ) you cannot change it until the vehicle is changed.

You will also be able to claim the running costs of the van less any disallowance for private use.

If you are VAT registered, you can usually reclaim the VAT charged on a van but only if the private use is "incidental" as you will read here and here.

I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 2 years ago.
Hi again.

It's been a few days since I answered your question. Is there anything you need further clarification on?

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