[ Spotlight: Van leasing ] You then need to decide if your policies and procedures
are stringent enough – if not, Vehicles for Business can help with free advice and information.
Why leasing is better than buying a new van More people today prefer to lease a van than to buy one. In these hard economic times, not everyone has the funds, or is able to arrange for the finance, to go out and pay cash for a new van or even a fleet of vans. Van leasing provides an affordable way to run a van. All you need to do is pay a small monthly rental charge and you can use the van for all your transportation needs.
VAT and taxation benefits Businesses and individuals who are opting for the finance lease option not only save money by doing away with the need to buy a new van, but also enjoy huge tax benefits. In fact, you can get all the benefits that are associated with owning a van. If you are going to be leasing a van, it is best to be
aware of all the factors associated with this option. You should know what you will get as tax benefits and what you will not. A clear understanding of this issue will help you avoid making a mistake. There are various ways to enjoy tax benefits with van
leasing. When you lease a van you have to pay a small initial deposit. This deposit is usually equivalent to three months’ rental charge. During the duration of your lease term you have to pay a monthly rental charge. Since finance lease is classified as a hire agreement, you can get 100 per cent tax relief on your payments. You will pay a monthly VAT amount along with your
monthly rental charges and, if you are VAT registered, you can claim 100 per cent back every quarter. If you do terminate your contract before the term expires, you will have to pay early settlement charges. The good part is that these charges are not as high as those associated with a contract hire agreement. The finance lease contract requires you to sell the
vehicle at the end of the contract. This is because, when your contract expires, the taxman will not give you tax benefits on both the ownership and lease. So you are legally required to sell the vehicle to get tax benefits. However, since finance lease is very flexible, there are several options available to you. You can sell your van to a third party and then use the sale proceeds to pay the ‘balloon’ or the final settlement payment, if one has been included in the contract. The ‘balloon payment’ refers to the final payment that you have to make after the contract expires. This payment is besides the monthly charges that you have been paying. After making the balloon payment, the funds left are the profit that you have made, and this profit, in turn, becomes taxable. The other option that you have after your van leasing
contract expires is to go for part-exchange option. In other words, you can exchange your van for a new van. In fact, you do not have to wait for your contract to expire to use this option. You can do it any time throughout your agreement. It is obvious that van leasing is a very good way to
save tax. However, if you are choosing this option to get tax benefits, there are few things that you should keep in mind. First, if you are leasing a van that has more than three seats, you might have to go through a very complicated tax process to get tax benefits. Secondly, in order to get tax benefits, your van should not have glass in the rear part. It is best to check the policy in your area, because there are certain parts in the UK where this policy is not so strictly applied. Thirdly, in order to get tax benefits, the van has to be used for company purposes. This is simply because tax benefits are calculated on the basis of year-end profits. Once you are aware of all the issues and tax benefits relating to van leasing, you can make an informed decision for yourself and your company. Vehicles for Business can help you every step of the
way, and we can offer you or your company free advice on any aspect of fleet management.
There are various ways to enjoy tax benefits with van leasing
About Vehicles for Business
The ECA has appointed Vehicles for Business as its Affinity Partner for the provision of fleet management services. Vehicles for Business (V4B), established in 1991, has 20 members of staff with more than 150 years’ combined experience in the finance and vehicle industry. V4B is based in purpose-built offices on the Chester – north Wales border. V4B is one of only 99 Network franchisees in the country and one of only 17 with Platinum Accreditation, an accreditation held for more than 10 years. It can deliver finance and vehicle support solutions that can be tailored for individual drivers and fleet operators alike. Network is a specialist division of Leaseplan, the world’s largest fleet management company, with 135,000 vehicles in the UK, and 1.5 million worldwide, on contract. It specialises in providing small businesses and private individuals with vehicle leasing solutions through its network of franchisees, and has developed a range of products and solutions that aims to deliver the very best in value and service. Vehicles for Business is also a BVRLA member, adhering to a strict code of conduct, guaranteeing customers the highest possible levels of service. Vehicles for Business can offer free advice on many aspects relating to fleet management, including taxation advice, accident management and health and safety. So, whatever the query, call on our dedicated ECA Freephone number: 0808 129 2222.
March 2011 ECA Today 61
SHUTTERSTOCK
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