Buying a van for business

Vans are a necessity to keep a business moving. In this guide, discover information about tax relief on van purchases as a sole trader.

Plus, we cover information on leasing a van for your business, and how to get exclusive deals.

Buying a van through a limited company

Buying a van through a limited company relies on you having the money to buy a new business van outright. So, if you can’t afford this option, a monthly payment might be better.

When you buy a business van, you can claim 100% of the cost of purchase against your capital allowances. This reduces your corporation tax bill. You can also claim the full VAT on the purchase price.

If you lease a van for work, you don’t own the asset. Therefore, you can’t claim against capital allowances.

However, you can offset the monthly lease payments (and any interest charged on the lease deal) against your taxable profits. Plus, you claim for any VAT paid on the purchase price.

How to buy a van through your limited company

If you’re buying a van through your limited company, you’ll need to research the most suitable model. Make sure the vehicle you choose is classified as a van according to HMRC.

For instance, a car won’t be subject to the same tax allowances. Whether you buy or lease a van through your limited company, make sure that:

• All documents are in your company’s name.
• All payments go through the company’s bank account.

Does buying a van reduce corporation tax?

Buying a work van through your limited company can be tax-efficient. This is because vans are classified as ‘plant and machinery’ for tax purposes.

Therefore, you can claim 100% of the cost of buying the van as part of your capital allowances. This falls under the Annual Investment Allowance regime.

Plus, you can take the whole cost of buying your work van off of your company’s taxable profits. And this will reduce your corporation tax bill.

The company can also claim the full VAT on the purchase price of a work van.

What to ask your accountant

Ask your accountant about the tax implications of using a work van for personal use. This is called Benefit in Kind. This relates to both the vehicle itself and the fuel needed to use it.

Also, make sure to ask how much of your van’s purchase price can appear in your accounts as depreciation.

What’s the best way to buy a van if you’re self-employed?

Look at finance options when buying a van as a self-employed business. The same can be said if you’re a sole trader. Just ensure you borrow within your means!

Buying a van on finance is a good way for you to build a good credit score and also manage your cash flow. Remember, when you buy a van, it becomes a business asset. But if you lease, this isn’t the case.

Buying a new van vs second-hand

When buying a van for business purposes, the question of used vs. new will cross your mind.

Leasing a van for business gives you access to the latest features and equipment. For instance, newer cars come equipped with reverse sensors and AI-driven technology.

However, leased and new vans do come at a higher cost.

Whereas buying a used business van means you could pay upfront for it, and officially own it. This removes the worry of back payments.

However, older vans don’t always have the latest technology installed.  Also, a used van may require more repairs, which can be costly.

So, a newer van may initially be more expensive. But in the long term, it could cost you less to run.

Tricks for buying a van for your business

Look for discounts and deals. Every penny saved works towards the bottom line. Remember, Checkatrade members get exclusive discounts with our partners, including Fiat Professional.

Check out the deals you get with a Checkatrade membership. And don’t forget that you’ll need commercial vehicle insurance. Your regular car insurance will not cover you for work purposes.

But we can get you discount on commercial vehicle insurance, too. Buying a van on eBay. With over 30,000 listings, eBay is a great place to find the best-used van.

But how does eBay work when buying commercial vehicles? And how do you ensure you stay safe?

Dan Powell, of Honest John Vans, shares his top 5 tips.

Sign up and start small

Thankfully, it only takes a few minutes to sign up for an eBay account. It can be tempting to start bidding for vans straight away. However, if you’re completely new to eBay, start small and bid on a few small, cheaper items.

This lets you become more familiar with how eBay operates. Not to mention, it helps build that all-important eBay feedback score!

eBay is much more than an auction site

Although eBay is billed as an auction site, vans can be bought in different ways. Some vehicles will be listed at a set price and sold instantly under the ‘Buy It Now’ listing. There are also thousands of ‘Classified Adverts’. These let you contact the seller, and view the van before paying the price.

There’s also the classic ‘Auction’ option. This lets you bid within a given timeframe. So, which one is best? That depends on your budget and the type of vehicle you want.

But it’s vital to understand the difference between the three options before making a bid or offer.

You can still haggle

It might be a digital platform, but you can still haggle to get the best deal. Buying a van sold through a classified advert? The buying process is the same as with any other sale. Just be sure of its value first, and your maximum budget. More importantly – be prepared to haggle! With a ‘Best Offer’ listing, eBay limits you to three attempts. So, don’t waste one by tabling a ridiculously low bid.

And leave yourself enough room so your final bid is the maximum you would be prepared to pay. A ‘Buy It Now’ listing is a fixed price, which means the seller is unlikely to accept a lower offer.

If you’re looking to haggle, it’s best to send a polite, private message to see if the price can be adjusted.

Bid to win

Timing is everything If you’re using the classic auction process. Be ready a good five minutes before the auction ends, and bid the maximum you’re prepared to pay 30 seconds before the auction ends.

Top tip: Don’t confirm your bid until only five seconds are remaining. This will mean other bidders won’t have enough time to enter another bid if you’ve outbid them.

Someone could still pip you to the post. But, doing this will prevent you from going over your budget in the last moments.

Remain smart and safe when paying

The seller may request a specific means of payment or allow a few options. PayPal offers a degree of protection, so it’s a good option for buyers. This also means that the fee charged for the service comes out of the seller’s payment.

When collecting the van, ensure the name and address on the V5C logbook match the details of the seller. You should also check the location of the vehicle.

Finally, always ask the seller for two forms of identification. This provides proof that they are the owner listed on the V5C registration document.

Is buying a van an allowable expense?

Wondering whether you can get tax relief on the purchase of a work van as a sole trader? The simple answer is, yes. But, you can’t always claim in the same way.

So, speak to your accountant before you buy a van for your business. Usually, you can claim the cost of your work van as a capital allowance.

However, if you’re unable to claim the full cost of the van, you may be able to claim other work-related expenses. This includes:

• Fuel
• Insurance
• Repairs
• Servicing
• Breakdown cover

And remember, you can’t claim for any non-work-related travel.

Quick summary

• Do your research to make sure the model you choose is classed as a ‘van’ by HMRC.
• Buying or leasing a van through your limited company? Make sure all paperwork and payments go through the company.
• When you buy a work van through a limited company, you can claim 100% of the purchase price against your capital allowances. This will reduce corporation tax.
• If you lease a work van, you can claim the monthly payments against your taxable profits.
• You can claim a van as a taxable expense if you’re a sole trader. But this depends on your setup.
• Speak with an accountant to understand the implications for your business.
• For deals and discounts on your next work van, check out the Checkatrade member benefits.