van lease

[Dalf]

Hi.
Just gone self employed and have a quick question.
If leasing a van are you entitled to claim back every payment you made for it at the end of the year?
Is it a good option?

Thanks

 

[FrankUK]

Lease payments are classed as an expense of operating the business, just as wages, postage, heating, lighting etc. and are deducted from gross profit. Gross Profit is classed as Income less Materials costs.

The VAT element of the lease payment is deductible in full if you are VAT registered.

 

[Dalf]

So you will not get all of what you paid for the lease at the end of the year then? Just a percentage?

 

[FrankUK]

I don't understand what you mean by 'get all of it back'?

Accounts don't work like that. Example below

Total yearly income, say £150,000
Cost of materials to do the work, say £50,000

Gross profit = £100,000

Less
Wages, say £50,000
Fuel, say £5000
Van lease, say £4000
Heat & light, say £1000
Other expenses (postage, admin, etc etc) say, £10,000
Total costs £70,000
Net Profit = £30,000

You will then pay tax on this profit. You don't get anything 'back'

 

[papycompany]

Like Frank was saying you have to register yourself for VAT to claim the VAT back and as far as I know you deduct just percentage of the cost, like you deduct fuel and all the rest

 

[BlueToBits]

Leasing a van in your first year can be a risky business. You may be tied into a multi year contract that will be expensive to get out of. Far more so than any tax saving you may make. Unless you are lucky enough to have a ready made client base there is every chance you won't make much of a taxable profit (if any) in your first year, - certainly not if you have a good accountant, so the benefit may be lost. Buy something tangible that you can sell on if the going gets tough.
Something like this (ahem) ...I should, however declare an interest in this....
http://www.electriciansforums.net/s...shape-%A33990-no-vat-cheshire-merseyside.html

 

[Robert Turnbull]

unless you are working as a subcontractor and are been stopped CIS.

that that case you will be "getting back" rather than paying less tax

 

[sparkwood]

the other thing with lease is mileage, watch what they have put in the small print. as the other guys said get urself something that looks ok and runs from a to b, getting clients and work is hard when starting out

 

[sythai]

I'd hang on a few years to see how things go, build up your business, good chance you may be VAT registered by then.... Not so much risk involved and will also get 20% back on your VAT.

All the best

Sy

 

[BlueToBits]

..... will also get 20% back on your VAT.

....

You only get back what you paid out in the first place, so it's an extra cash flow expense you really don't need in your first year. Get one that will be cheaper without VAT. - like mine! I can even provide you with custom vinyl signs.
http://www.electriciansforums.net/s...shape-%A33990-no-vat-cheshire-merseyside.html
If your work is mostly domestic, you will be more competitive and earn more money if you can avoid becoming VAT registered for as long as possible. The ONLY person who wins with VAT is the VAT man.

 

[grantr37]

I was speaking to a spark the other day who was a car enthusiast, the conversation started out about track cars then in passing he mentioned that his family had a small taxi business....I said to him about certain cars being popular taxis and asked him if it was because they were reliable, he said that they were not going to be as popular for taxis now as what had happened was that there was a deal on them for leasing that meant they could be had for a good price, the rental written into the accounts as an expenditure/liability then at the end of it, the taxi firms would hand them back at the end of the 3 years and terminate the lease without going for the option to buy at about an extra £4,000....returned to the lease/hire purchase firm with about 200,000 miles on the clock and they couldn't sell them on again for much due to the mileage and abuse....
This was something that wasn't thought about( no pence per mile etc) and the leases were intended for retail customers, but they never said no to business customers.....this has been changed now....


from what I gather, a lot of lease companies are going to be stopping certain businesses i.e building firms and Electricians/taxi companies from taking on leases and making full outright purchase the only option, whereas parcel delivery firms, florists and Bakeries etc will still be allowed cars and vans as they will return them in a reasonable resale condition.....as opposed to being abused,dented, scraped rusty and on big mileage....

I would buy a secondhand van for your start up working for yourself....