Clean It Up
UK Window Cleaning Forum => Window Cleaning Forum => Topic started by: bobplum on June 06, 2014, 08:37:05 pm
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can you offset all the payments against tax????
thanking you
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Yes
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theres that man again ;) ;)
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Hows things fella, all ok? ;D
Edit : Just re-read your post bob, you say 'all' payments...
I'm not sure if you can offset 100% if i'm honest, think its a certain %
Speak to your accountant they'll give you a more exact answer, but you'd be better off buying a van on pay monthly than leasing imo.... Its around the same a month, but if you've brought it you can do what you want with it (i.e bolt tank to floor etc...) without worrying if it voids your terms of lease, and at the end of the payments you've got an asset to sell if you wanted to....
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not to bad, enjoyed the sunshine today.....reminded me of dorset :D
Im looking to get a bigger van so looking at the different options.but it always come down to money............will have too stop buying ice creams
Hows your side kick doing :)
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Just edited above post mate
Grandads fine mate, still making his millions but wiping away the cobwebs of the old wallet ;D
Yeah was lovely here as well, cant moan (although i still find a way to!)
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the way i see leasing is its only good for people with a decent income and no capital
or people who need to run a fleet
otherwise if you can spare or save the cash buying is obviously way better , maybe even if you can only afford something a few yr old its probably better financial sense
if i couldnt afford to buy cash i'd go get a loan from my bank and buy new off the forecourt or nearly new
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Hows things fella, all ok? ;D
Edit : Just re-read your post bob, you say 'all' payments...
I'm not sure if you can offset 100% if i'm honest, think its a certain %
Speak to your accountant they'll give you a more exact answer, but you'd be better off buying a van on pay monthly than leasing imo.... Its around the same a month, but if you've brought it you can do what you want with it (i.e bolt tank to floor etc...) without worrying if it voids your terms of lease, and at the end of the payments you've got an asset to sell if you wanted to....
I doubt you will get away with claiming the total repayment against tax with the Receiver.
In the case of a business where the van is a pool vehicle (Post office is one example) where it is only used for business purposes with different drivers, their accountant will probably have applied and received a directive from the tax office that they can do this.
As a sole trader you will have a hard time trying to convience the tax office that the van will only be used for business purposes 100% of the time in the period you are renting/leasing it. You will have to convience them that the van will never be used to go to the chippy at lunch time etc ever. This is the reason why my van is 90% business and 10% private use even although I own a private car.
So in this context, not all of the rental is tax deductable.
Bolting a tank in the back:
A finance lease doesn't carry the same strict return to Lessor minus fair wear and tear as Contract Hire does. A finance lease is typically renting a depreciating asset that will have a value at the end of the lease. That value is referred to as a final balloon payment.
At the end of the lease you can trade the van in for a new one and the trade-in should cover the balloon payment. If it doesn't then you are responsible for the shortfall. You could also take out a loan or other finance and continue to 'own' the vehicle. You could at the outset choose to increase your monthly payments to reduce the size of the balloon at the end of the rental period. If the van was being leased to a building firm, then the finance house agreeing the lease would more than likely refuse a final balloon payment - the final payment would complete the agreement apart from a 'paperwork' charge that might be lieved. So their monthly lease payment would be more than a florist for example for the same van.
In reality, it makes no difference whether you own a vehicle by financing it on HP or lease. At the beginning you start with a new van that costs "X" and after 3 years with "Y" mileage your van is worth "Z". The difference between "X" and "Z" is depreciation which will be the same no matter how the van is financed.
Vehicle depreciation isn't linked to the way its financed.
Leasing is a way of getting the user into a vehicle replacement cycle. Once your 3 or 4 years contract is complete you start with a new van. It is a way of keeping business vehicle fleets updated/fresh and applies to the sole trader as well.
If you take a van on HP, you will usually pay off your HP agreement after a maximum of 5 years. You then keep the van another few years only to find that in the end you will most likely have an unreliable old banger with very little commercial value.
During the length of the HP agreement, the van is registered in your name, but you don't own it. The finance house does and only finishes 'having an interest in it' when the finance is complete. So what's the difference between leasing, contract hire and HP. Nothing. It's how you look at it.
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Hows things fella, all ok? ;D
Edit : Just re-read your post bob, you say 'all' payments...
I'm not sure if you can offset 100% if i'm honest, think its a certain %
Speak to your accountant they'll give you a more exact answer, but you'd be better off buying a van on pay monthly than leasing imo.... Its around the same a month, but if you've brought it you can do what you want with it (i.e bolt tank to floor etc...) without worrying if it voids your terms of lease, and at the end of the payments you've got an asset to sell if you wanted to....
I doubt you will get away with claiming the total repayment against tax with the Receiver.
In the case of a business where the van is a pool vehicle (Post office is one example) where it is only used for business purposes with different drivers, their accountant will probably have applied and received a directive from the tax office that they can do this.
As a sold trader you will have a hard time trying to convience the tax office that the van will only be used for business purposes 100% of the time in the period you are renting/leasing it. You will have to convience them that the van will never be used to go to the chippy at lunch time etc ever. This is the reason why my van is 90% business and 10% private use even although I own a private car.
So in this context, not all of the rental is tax deductable.
Bolting a tank in the back:
A finance lease doesn't carry the same strict return to Lessor minus fair wear and tear as Contract Hire does. A finance lease is typically renting a depreciating asset that will have a value at the end of the lease. That value is referred to as a final balloon payment.
At the end of the lease you can trade the van in for a new one and the trade-in should cover the balloon payment. If it doesn't then you are responsible for the shortfall. You could also take out a loan or other finance and continue to 'own' the vehicle. You could at the outset choose to increase your monthly payments to reduce the size of the balloon at the end of the rental period. If the van was being leased to a building firm, then the finance house agreeing the lease would more than likely refuse a final balloon payment - the final payment would complete the agreement apart from a 'paperwork' charge that might be lieved. So their monthly lease payment would be more than a florist for example for the same van.
In reality, it makes no difference whether you own a vehicle by financing it on HP or lease. At the beginning you start with a new van that costs "X" and after 3 years with "Y" mileage your van is worth "Z". The difference between "X" and "Z" is depreciation which will be the same no matter how the van is financed.
Vehicle depreciation isn't linked to the way its financed.
Leasing is a way of getting the user into a vehicle replacement cycle. Once your 3 or 4 years contract is complete you start with a new van. It is a way of keeping business vehicle fleets updated/fresh and applies to the sole trader as well.
If you take a van on HP, you will usually pay off your HP agreement after a maximum of 5 years. You then keep the van another few years only to find that in the end you will most likely have an unreliable old banger with very little commercial value.
During the length of the HP agreement, the van is registered in your name, but you don't own it. The finance house does and only finishes 'having an interest in it' when the finance is complete. So what's the difference between leasing, contract hire and HP. Nothing. It's how you look at it.
SPRUCE.......WOW ;D
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Bob,
the leasing house/finance company will tell you that all payments are tax deductable, but that's from their sales point of view.
A contract hire agreement is a straight forward lease, the monthly payment which are reflected on your profit and loss account only. The van isn't yours, it isn't registered in your name and at the end of the contract, you hand the van back and start again with a new contract and a new van. It isn't an asset on your books. Your aren't able to buy the van either.
The contract will be a payment + VAT = total payment. As a sole trader and not VAT registered, you claim back the whole payment less your private useage percentage.
If you incur a cost from the finance house at the end of the contract hire for such things as over mileage, damage rectification etc., then this is a business expense to be offset against tax, again taking into consideration your private mileage element of the expense.
A Finance lease is different. The vehicle is registered in your name and is treated as an asset on your books. You won't write it's value down every year by the receiver's formula as it is still a lease vehicle. If the van doesn't fetch the final payment (balloon) at the end of the contract, then the difference is entered into your profit and loss account as an expense. If you trade the van in for more than the value of the final balloon payment, the salesman will tell you the difference is for your back pocket. But in reality, this is classed as a capital gain and you will pay tax on that.
If you decide to keep this van that you have had on finance lease, then it now becomes a depreciating asset on your books the same as if you just purchased it. Usually the final balloon payment is a good value to start with as it was set by the finance house. If not, you will need a couple of commercial dealers to give you a written valuation to satisfy the receiver.
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Spruce are you sure your not an accountant pretending to be a window cleaner ?
Excellent post.
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Spruce are you sure your not an accountant pretending to be a window cleaner ?
Excellent post.
I used to sell commercial vehicles to businesses in a previous, very stressed other life. ;D
And Sean, your comment about leasing more suited to fleets has a lot of truth in it. However, the sole trader can also use those benefits to his advantage.
A lease is usually based on an initial first payment of 3 months rental in advance followed by a monthly payment over the period. So a 48 month lease would look like this; 3/47. So this low initial deposit allows a trader to get into a vehicle for a low deposit, which enables him to have more capital to grow his business.
If you were buying the same van on HP, most finance houses expect a 10% - 20% deposit on the value of the van + the full VAT as a deposit. ( For example, £8995 + £1799 VAT = £10794. Finding a deposit of £2698.50 to £3598.00 is a big ask for any sole trader. But a higher deposit will reduce your monthly payment amount.)
Another thing you have to consider with vehicle payment is your age. I'm in the position at 62 where I know my working life is becoming more difficult due to age and health related issues. I don't want to be jumping onto the 'hamster wheel' of regular van replacement as I have a finite working future. But someone younger will view this differently.
I'm in the situation where I have a totally owned Citroen Relay van which is 10 years old and has 52k on the clock. The paint is peeling and I am continually forking out for wearing items. I'm running an unreliable old banger. But I maybe able to work for another 3 or 4 years, but I'm not able to do enough work a day to justify a new van on lease.
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Its a great idea to lease if your vat registered, otherwise its not worth it!
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Its a great idea to lease if your vat registered, otherwise its not worth it!
Its also just as great to buy a van if you are VAT registered.
What you are referring to is that VAT is charged on each rental rather than as a lump sum at the beginning. This can be a benefit as you will pay less VAT on the van on instalments as you haven't considered the final residual held in the van. Remember, the van has been bought and is owned by a VAT registered finance house.
If you lease the van and then settle the balloon, then you will have paid more VAT as you are paying VAT on the interest as well as the van. However, the rentals are based on a price structure that gets an additional fleet discount direct from the manufacturers that the average retail buyer wouldn't get. It is based on quantity purchased through the year. The more they purchase the higher the bonuses they receive.
This makes the initial purchase price cheaper and with this comes a lower VAT element. You need to get a deal stacked up and then you need the break it down and compare all the elements of the lease to a normal HP deal for the same vehicle purchased through the dealership. But don't ask the dealership to quote you a leasing deal using their own figures. In other words, if you are interested in a Citroen, then the leasing deal needs to be stacked up by Citroen Contract Motoring and not dealership costing figures presented to Black Horse finance for a quote. The dealership also gets an annual kick back bonus on units achieved above the preset sales target, but this is very really used to 'sweeten' the deal in your favour.
It also pays to shop around for leasing deals in the same way as you do for van insurance.
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So Spruce as i understand it a contract hire vehicle is simply a rental contract as such , So does finance have to be arranged and a loan applied for , For the cost of the vehicle under the a contract hire .
Or is it simply a case of renting the vehicle placing down a deposit and paying the monthly payment under contract . Thanks Mike AKA M&M Window Cleaning
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So Spruce as i understand it a contract hire vehicle is simply a rental contract as such , So does finance have to be arranged and a loan applied for , For the cost of the vehicle under the a contract hire .
Or is it simply a case of renting the vehicle placing down a deposit and paying the monthly payment under contract . Thanks Mike AKA M&M Window Cleaning
You are renting a piece of equipment for an agreed duration and mileage with contract hire.
Once the period or term is up, you hand the the equipment (or van in this case) back to the owner. Provided you have upheld your side of the deal, ie., kept within the agreed mileage, not damaged the van beyond normal wear and tear etc., then you will not incur any further penalty costs.
The finance house supplying the vehicle on contract hire or any other form of leasing, will treat the application in the same way it would for any other credit application. We had many an enquiry from people with bad credit history apply for a lease and turned down. They had previously been turned down for HP from other finance houses but often failed to disclose that information.
One thing I didn't mention is that contract hire does have other benefits apart from offering a smaller deposit than if you were buying a van outright on HP.
Included in the rental price is your annual road fund licence; breakdown cover will be an option you can get which covers the van for the remaining part of your contract after the manufacturer's warranty expires. You can also do a contract hire with maintenance which will also include fair wear and tear tyres. This helps the business with a fixed monthly running cost. The only thing they have to do is fuel it, fully comprehensively insure it and pay for any punctures or non fair wear tyres.
Most finance houses are also very flexible. They realise that things can change during the duration of the contract. If you find you are going to be over mileage then you can approach them about 3/4's of the way through your contract and revise the mileage. This will prevent a much larger penalty for over mileage levied at the end of your contract. (If you have a contract with maintenance, then they will be on to you pretty quickly to revise the contract. However, they can forget if your circumstances change and you aren't doing the mileage you forecast. The difference between 8k and 12k per annum will make a reasonable difference to the van's value at the end of the contract.)
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Spruce thanks very much for that , I just wanted a better understanding of the initial requirements ie finance as they never publish this on the sites . Mike
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Spruce ! Do you have sore fingers ?
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Spruce ! Do you have sore fingers ?
;D
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Just a little note, I put 100% work use in my van.
I've got a car that I take to work sometimes and I sometimes use the van to go to the tip or something.
It all balances out for me.
I've never had grief from the tax guys about it.
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Just a little note, I put 100% work use in my van.
I've got a car that I take to work sometimes and I sometimes use the van to go to the tip or something.
It all balances out for me.
I've never had grief from the tax guys about it.
That's fine. However, it doesn't mean that another windie in a different part of the country doing exactly as you do will not have grief from a different tax assessor.
The Receiver does call it "Self Assessment." In other words, you pay tax on how you see your business performing. I was told at a Receiver interview once that what I see as self assessment, no matter how genuine, may not be the way the Receiver sees it if you should be audited.
A fellow windie in our town views it the same way as you do; he claims his van at 100% business as he uses his car for business related stuff, although he claims a tank of fuel every so often. Again, that's how he sees his business.
So for you, the rental payments on a lease van will be totally claimable. :)
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spruce were would you go for the best deals on leasing
bob
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I'm leasing from Vanarama
Seem good to me and looking to go again with them in October
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I'm leasing from Vanarama
Seem good to me and looking to go again with them in October
what van do you johnnyboy
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spruce were would you go for the best deals on leasing
bob
We found Northgate to be very competitive. Their HQ is in Darlington Co Durham, but they have depots throughout the country.
Because of the way they work, you won't be able to sign write one of their lease vans, even if you have it on a long term contract. They are decalled with Northgate. The Middlesbrough council has been using them for a while now, having agreed to this stipulation.
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I'm leasing from Vanarama
Seem good to me and looking to go again with them in October
what van do you johnnyboy
Astra van with a 350LTR system
need bigger, so going for a transit custom