Financing a vehicle through a farm

[mountfarm]

Not done this for a while and I’ll speak to the accountant but would like a heads up before doing so. What’s the most cost effective and tax efficient route for doing this presently. It would be a SUV £50,000 - £60,000 having looked around so far either land rover or merc I would think. I haven’t spoken to dealers but looking at retail prices and carwow deals I can roughly see where it would be. The vehicle will more than likely be changed at 3 years old when the warranty runs out and will have about 45,000 miles on the clock if that makes any difference. It’ll be driven by a partner in the business and will be 50:50 business/personal use but will live at the business premises. It could possibly be put through a LTD company if that’s a better option.

 

[chaffcutter]

Buying or leasing better via partnership or sole trader because of the punitive tax payable for private use through a company. Leasing has the advantage that you can claim 50% of the VAT on the lease payments which you can’t if financing in any other way. But leasing is expensive at present when interest on a loan or HP is so low.

 

[TripleSix]

@Johnnyboxer

 

[Johnnyboxer]

Not done this for a while and I’ll speak to the accountant but would like a heads up before doing so. What’s the most cost effective and tax efficient route for doing this presently. It would be a SUV £50,000 - £60,000 having looked around so far either land rover or merc I would think. I haven’t spoken to dealers but looking at retail prices and carwow deals I can roughly see where it would be. The vehicle will more than likely be changed at 3 years old when the warranty runs out and will have about 45,000 miles on the clock if that makes any difference. It’ll be driven by a partner in the business and will be 50:50 business/personal use but will live at the business premises. It could possibly be put through a LTD company if that’s a better option.

Buy it via HP in the partnership business
Don’t get sucked into 3 years and a balloon (your interest cost will be higher, per se for the same interest rate)
Fund over 5 years, monthly on HP & then swap at 3-5 years to suit you and rollover the smaller settlement if necessary - Monthly payments won’t be a lot different- but overall interest paid will be less

Don’t put it in the Ltd Co, you will pay BIK
Putting it in partnership is more cost effective on all fronts (check the annual capital allowance limits for cars, via your accountant)

You can recharge 45p per mile (up to first 10,000miles & 25p per mile thereafter) for any business travel for your Ltd Co (again another tax saving break) for a SUV owned in your partnership
Hope that helps [emoji106]
But run that by your accountant though [emoji41]

 

[Johnnyboxer]

Buying or leasing better via partnership or sole trader because of the punitive tax payable for private use through a company. Leasing has the advantage that you can claim 50% of the VAT on the lease payments which you can’t if financing in any other way. But leasing is expensive at present when interest on a loan or HP is so low.

Claiming 50% vat back for leasing a car is somewhat unpopular now, as you have to charge vat when you sell it and no private punter or even a dealer wants vat on top of the used secondhand car price

For example
4 yo Disco maybe £20,000 as a trade in or private retail
Yours with vat would be £16500 + Vat (which you would have to hand half back to tax man - £1750) & yours would be £18250 and not £20k (not sure of exact arithmetic- but disposal is a turnoff)

Plus the lease disposal hassles and knock offs

 

[chaffcutter]

I thought that it only applied to leasing, as you say you wouldn’t want to do it on a purchase

 

[Johnnyboxer]

I thought that it only applied to leasing, as you say you wouldn’t want to do it on a purchase

50% vat reclaim on Cars, only applies to Leasing as you say

It’s the disposal at the end that becomes messy as nobody wants a 3-4 year old used car with vat on it

 

[RJ1]

Buy it via HP in the partnership business
Don’t get sucked into 3 years and a balloon (your interest cost will be higher, per se for the same interest rate)
Fund over 5 years, monthly on HP & then swap at 3-5 years to suit you and rollover the smaller settlement if necessary - Monthly payments won’t be a lot different- but overall interest paid will be less

Considering a few options myself. If a buy a pickup, I get to claim all the vat back and put it against tax. Correct?
If an suv, is vat and capital cost vs tax apportioned according tonprivate/business use?

 

[Johnnyboxer]

Considering a few options myself. If a buy a pickup, I get to claim all the vat back and put it against tax. Correct?
If an suv, is vat and capital cost vs tax apportioned according tonprivate/business use?

Pickup - yes it’s a commercial so vat is reclaimed if you are eligible and vat registered and you can claim 100% of the net cost against tax, via your annual capital allowances

SUV - vat is included in new cost and you cannot claim it back (unless you claim 50% back fit business use via a Lease only, not HP or paying cash)
Used suv doesn’t attract vat and the price is the price, without any applicable vat
SUV is a car, so capital allowances are restricted annually - with differences between first year allowances and subsequent allowances
Cars are complex and based on CO2 levels and really a job for your accountant, not me

Claim capital allowances

Claim capital allowances so your business pays less tax when you buy assets - equipment, fixtures, business cars, plant and machinery, annual investment allowance, first year allowances.

www.gov.uk

Most opt for the simplified mileage allowance for business use as described above posts

I charge my SUV use on my LTD Co business as it is much simpler and efficient way to do it