Purchasing a new Van

Towards the end of this month my business will need a new van but I will probably need to borrow substantially to fund the purchase. Should I wait until after the tax year to purchase this as I will need to borrow less, and will it make any difference if I do for tax purposes?

1st February 2009

As a van is classed as Plant & Machinery for tax purposes, there may be a significant tax planning opportunity to acquire the van prior before the end of the tax year, as assuming your accounting period ends on 5th April 2009, you will receive tax relief on the purchase 12 months earlier than delaying the purchase untill after April 2009.  

This is because you can now deduct 100% of the first 50,000 spent on plant and machinery under the new Capital allowance Annual Investment Allowance (AIA) introduced in April 2008. This can be claimed whether or not the van is new or second-hand, purchased outright or is financed via loan or hire purchase agreement. 

You have mentioned that purchasing the van earlier may require you to raise finance through a loan. As the loan is used to fund the purchase of equipment for your business, the interest paid will allowable when establishing your business profits, and if you are a higher rate tax payer, could provide you with upto 41% tax and national insurance relief on the interest you pay.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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