Company Van

[dickidido1471]

Hi, I am new here so please bear with me!

I am currently a self employed (sole trader). I do work (deliveries and servicing) for a couple of companies. About 70% of my work comes from one company.

Due to the directors retiring in this company, I have decided to buy their shares (a small ltd company not listed). I would then become employed by the company in early April 2007.

My question is this - the van used for deliveries etc is currently owned and registered in my personal name. Can the company rent the van from me?

If possible, I dont want to sell the van to the company because, a) the outstanding finance on the van is more than its current value (had to swallow the vat as I am not vat registered) and b) If i did sell the van at such a price to clear the loan, then I would be clobbered with a considerable balencing charge! (something i would prefer to avoid). I won't reach the point where i can sell the van at a value where i can balence the loan/tax issues till approx jan 2008.

There maybe other possible solutions that I have not thought of - if anyone can come up with an alternative.


Thanks to all who ponder over this one.

Richard

[malvolio]

Seems the simplest solution is to continue to use the van and charge the company for business mileage at the appropriate rate. Since it's yours, there's no question of BIK arising and it would be perfectly legitimate.

Other option is, as you say, to sell the van to the company at a mutually agreeable price. (I didn't say either market-value or net worth... )

However there may be oddities with commercial vehicles, so I should talk to an accountant.

[dickidido1471]

The problem I forsee with the private milage route is this.

I do 35,000 business miles per year. If I claim 35p per mile (I dont know what the allowence is for the van it may be higher - I am guessing), that gives a payment of £12250 from the company in a 12 month period. The operating expenditure (fuel/tax/insurance/servicing) is normally between £5k and £5.5k. Even if I can continue to claim interest on the loan and capital allowence, I will end up with at least £5k surplus which I understand will be treated as taxable income.

[Sockpuppet]

Nope.

Its 40p (for a car might be different for a van) however that amount can be taken tax free as its what HMRC say is fair wear and tear.

It drops after the first 10,000 miles (per year) so adjust your rate accordingly.

[malvolio]

Exactly. Stay within the allowance and it's not seen as a Benefit in Kind (BIK) and is not therefore taxed as income. Car rates are 40ppm for the first 10k, 26ppm thereafter, so your 35k miles returns £10.5k pa - how does that compare to the purchase, servicing, fuel depreciation and lost interest on capital that the van costs you a year? Probably closer than you think to the real cost.

Like I said - talk to an accountant.