When in the market for a new vehicle it is worth considering the tax implications of what can be a large purchase for a small business.
The current tax regime offers a generous 100% Annual Investment Allowance for qualifying capital expenditure up to £250,000. For most small businesses this will cover all of the annual capital expenditure but to qualify your new vehicle needs to be classed as a van not as a car.
HMRC provide us with the following on their website...
In deciding whether or not a particular vehicle counts as a car for car benefits purposes, the starting point is the definition in Section 115(1) Income Tax (Earnings and Pensions) Act 2003 (ITEPA). This works by exception: every mechanically propelled road vehicle is a “car” unless it is
(i) a goods vehicle (a vehicle of a construction primarily suited for the conveyance of goods or burden of any description),
(ii) a motor cycle (as defined in Section 185 Road Traffic Act 1988),
(iii) an invalid carriage (also as defined in that Act), or
(iv) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.
The result of this is that the primary function of the vehicle must be for the conveyance of goods or burden. Therefore luxury off-road vehicles would not qualify but some (not all) pick-up trucks would qualify.
Where the vehicle doesn't qualify as a van the tax treatment will depend on the CO2 emissions resulting in annual allowances of 18% for a cleaner car (currently those with CO2 emissions over 130g/km) or 8% for a "dirty" car.
The result of this is very much delayed relief so worth considering when you are choosing your vehicle.
It is worth noting that Vehicle Excise Duty and VAT legislation are both different to tax legislation, so the same vehicle can be treated differently by the different agencies. For instance, VED is based on type approval at the time the vehicle is first registered, whereas VAT and the tax/NICs regimes consider the nature of the vehicle at the time of the transaction or in the relevant tax year.
If you are unsure please contact us before you buy!
For a helpful list from HMRC try here.
The current tax regime offers a generous 100% Annual Investment Allowance for qualifying capital expenditure up to £250,000. For most small businesses this will cover all of the annual capital expenditure but to qualify your new vehicle needs to be classed as a van not as a car.
HMRC provide us with the following on their website...
In deciding whether or not a particular vehicle counts as a car for car benefits purposes, the starting point is the definition in Section 115(1) Income Tax (Earnings and Pensions) Act 2003 (ITEPA). This works by exception: every mechanically propelled road vehicle is a “car” unless it is
(i) a goods vehicle (a vehicle of a construction primarily suited for the conveyance of goods or burden of any description),
(ii) a motor cycle (as defined in Section 185 Road Traffic Act 1988),
(iii) an invalid carriage (also as defined in that Act), or
(iv) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.
The result of this is that the primary function of the vehicle must be for the conveyance of goods or burden. Therefore luxury off-road vehicles would not qualify but some (not all) pick-up trucks would qualify.
Where the vehicle doesn't qualify as a van the tax treatment will depend on the CO2 emissions resulting in annual allowances of 18% for a cleaner car (currently those with CO2 emissions over 130g/km) or 8% for a "dirty" car.
The result of this is very much delayed relief so worth considering when you are choosing your vehicle.
It is worth noting that Vehicle Excise Duty and VAT legislation are both different to tax legislation, so the same vehicle can be treated differently by the different agencies. For instance, VED is based on type approval at the time the vehicle is first registered, whereas VAT and the tax/NICs regimes consider the nature of the vehicle at the time of the transaction or in the relevant tax year.
If you are unsure please contact us before you buy!
For a helpful list from HMRC try here.
