Quantity surveyor client asks:
I need to get a new vehicle for the business. I don’t want a van, but the job means a car isn’t practical. I’m thinking about a pick-up instead - a Ford Ranger or Nissan Navarra type of thing. What do I need to be aware of regarding tax etc?
Acumenica answers:
The first thing you absolutely MUST do is ensure that the vehicle is treated as a commercial vehicle for tax and VAT purposes. The chances are it will be but there are a few on the market that don’t. The key thing to consider is the payload. For the pick-up truck to be classed as commercial, the payload needs to be more than 1 tonne. Also, be aware that if the vehicle has a cover on the back. Once you’ve established this, here’s what else you need to know:
VAT treatment
If the company is VAT registered, even if it’s on the VAT flat rate scheme, it should be able to recover 100% of the VAT paid on the purchase, if it’s being bought outright or on a hire purchase type agreement. If it’s being leased, the company should be able to recover the VAT on the lease payments, but only if the company is on standard VAT. The flat rate scheme does not allow for recovery of VAT on lease payments.
Capital allowances
The pick-up truck will be classed as plant and machinery and therefore the company should be above to write off 100% of the pick-up’s costs against taxable profits in the year of purchase. In other words, what you pay for the pick-up will be deducted from the company’s profits before corporation tax payable is calculated.
Personal tax
If you use the pick-up for personal use (commuting included), there will be a personal tax charge on you - currently £3,600 for the 2023/24 tax year. That means if you are a higher rate taxpayer you will incur an income tax charge of £1,440
If the company also pays all the fuel costs then you will have a benefit in kind for the personal use of the fuel as well - currently £688 for the 2023/24 tax year. Again, if you are a higher rate taxpayer you will have income tax to pay of £279.20
These benefits in kind will need to be reported to HMRC each year on a P11d.
National insurance
And the company will also be liable to Class 1a National Insurance on the total benefit - currently 13.8%. So the company will have to pay Class 1a of £496.80 on pick-up BIK, and £94.95 on the fuel.
