Do You Get Tax Relief On The Purchase Of Vans?
If you are wondering whether or not you can get tax relief on the purchase of vans, you will find the answer to your question in the following blog post. In addition to this, we will also discuss the process and requirements for claiming tax relief on the purchase of vans; as well as review some common mistakes to avoid before or during the process of filing your tax relief claim.
Do You Get Tax Relief On The Purchase Of Vans?
Yes, you can claim tax relief on the purchase of vans purchased for commercial use as long as you meet the qualifying criteria for the relief and are aware of the limitations that apply to you.
Here are some of the tax reliefs that you can claim on the purchase of a van in the UK.
Firstly, there is the Annual Investment Allowance (AIA). This allowance allows businesses to claim tax relief on the cost of qualifying assets, including vans, up to a certain limit. As of April 2023, the AIA limit is set at £1 million, meaning that businesses can deduct the full cost of a van up to this amount from their taxable profits.
Additionally, businesses can claim Capital Allowances on the purchase of a van. Capital Allowances allow businesses to deduct the cost of assets, such as vans, from their taxable profits over a period of time. There are different rates of Capital Allowances depending on the type of van and its emissions. For example, low-emission vans may qualify for higher allowances.
Since vans and commercial vehicles are categorised under plant and machinery, if you are purchasing a van (or vans) for your business, you will be able to claim a 130% super-deduction capital allowance if you qualify for it.
There are certain eligibility criteria to qualify for this super deduction; which include the following:
- the company is subject to Corporation Tax
- the expenditure is incurred on or after 1st April 2021 but before 1st April 2023
Alternatively, you may be able to get a 50% first-year allowance (FYA) for qualifying special-rate assets.
Furthermore, if the van is used exclusively for business purposes, you may be able to claim back the Value Added Tax (VAT) on the purchase; provided that your company is registered for VAT.
VAT is charged on the purchase of most goods and services in the UK, but businesses can reclaim the VAT on items that are solely used for business purposes. Therefore, it is important to keep all relevant receipts and records to support your claim for VAT relief.
If you are self-employed and using your van for commercial purposes, you can also claim back payments made on account of the following expenses related to your purchase of a van:
- Vehicle insurance
- Repairs & servicing
- Hiring charges
- License fees
- Breakdown cover
What Are The Requirements For Claiming Tax Relief On The Purchase Of Vans?
To claim tax relief on van purchases for your business, there are a few requirements to be fulfilled and steps you need to follow. First, it’s important to note that the rules for tax relief on van purchases can vary depending on your specific circumstances and the type of van you are purchasing.
In general, to claim tax relief on a van purchase for your business, you will need to meet the following requirements:
- The van must be used solely for business purposes. It should not be used for any personal use, except for minor incidental use. It’s important to keep a log of all journeys made for business purposes in case of an audit.
- The van must be new and unused. If you are purchasing a used van, it may still be eligible for tax relief, but the rules and conditions may differ.
- The van must be bought outright or financed with a hire purchase agreement. Leased vans or those purchased through a contract hire or similar arrangement may not qualify for tax relief.
Once you have met the requirements, you can claim tax relief through your annual Self Assessment tax return. You will need to include the cost of the van in your capital allowances claim. Therefore, it is recommended to keep all relevant documentation, such as invoices and receipts, to support your claim.
What Are Some Common Mistakes To Avoid When Claiming Tax Relief On The Purchase Of Vans?
Here are some common mistakes to avoid when claiming tax relief on van purchases:
- Not maintaining accurate records to claim tax relief: You should maintain precise documentation of all expenses related to your van, such as the acquisition cost, fuel expenditures, maintenance expenses, and any other expenses linked to employing the van for business activities. Failure to maintain precise documentation may result in a reduced ability to claim the entire amount of tax relief available to you.
- Claiming tax relief for a van that is not used for business purposes: Tax relief can only be claimed on vans that are solely used for business purposes. In cases where the van is used for both personal and business purposes, tax relief can only be claimed for the portion of time the van is used for business purposes.
- Claiming tax relief for a van that is not eligible for tax relief: Tax relief is only available for vans that are classified as “goods vehicles”. It’s important to note that not all vans qualify for this classification. If you’re unsure whether your van meets the criteria, it’s recommended that you seek advice from a tax specialist.
- Not claiming tax relief in the correct tax year: Tax relief for van purchases can only be claimed for the current tax year. In the event that a van is purchased in the middle of the tax year, the amount of tax relief that can be claimed will need to be prorated accordingly.
- Making a mistake on your tax return: Including the details of your van purchase on your tax return is crucial when claiming tax relief. Any errors made on the tax return can potentially cause a delay in receiving your tax refund or trigger an audit. It is essential to be meticulous when reporting the van purchase information to avoid any issues with the tax authorities.
The above discussion helps to conclude that you may be able to claim tax relief on the purchase of vans used for commercial purposes. When purchasing a van for your business, it is important to be aware of the tax reliefs that you may be eligible for and apply for them accordingly. This can help to reduce the overall cost of the van and make it a more financially viable investment.