What are the Tax Benefits of Leasing a Van?
Van leasing has become a popular
choice for employers, sole traders, small businesses or fleet managers, due to
the many benefits of van leasing deals.
There are various flexible advantages
as well as tax benefits that you can enjoy if you choose to lease a van for
Leasing Tax Benefits
Although there are tax liabilities
associated with certain types of use of company vans, there are also ways to
reduce the tax burden, and one of these is by leasing a van.
It is an alternative to owning them
If a business enters a van
leasing deal, it is treated, for tax purposes, in the same way as renting a
The lease payments are a fully tax-deductible
expense in profit and loss accounts.
If the company leasing its vans is
paying VAT on the lease, then you can also reclaim this.
These tax benefits apply to contract
hire leases, and the company will not have to pay VAT on its monthly finance
Where the company has taken out a
finance lease, it can offset these charges against its annual profits.
However, VAT is also recoverable on
any service costs involved in taking out an optional service or maintenance
package as part of the lease.
Benefits from Leasing a Van
Leasing a van means the initial
capital outlay is going to be less, supporting business cash flow requirements.
It also offers immediate access to a
wider range of quality vehicles at affordable rates.
is Company Van Benefit in Kind Tax?
Companies that provide vans and fuel
to employees have certain obligations when it comes to tax reporting.
If an employee of a company drives
one of its vans, they MAY be liable to pay benefits
in kind (BIK) tax.
BIK applies if they use the van for
their own private journeys in addition to business ones.
It is levied at a flat rate, but
companies are obliged to notify the taxman.
From April 2020, the flat-rate
van benefit charge rates will
be increased, for the 2020 to 2021 tax year, to £3,490.
Does Company Van Tax Not Apply?
Usually, Van BIK does not apply as if
you use your van for business journeys exclusively, or the van has shared use,
as a pool van, then there is no BIK tax to pay.
HMRC defines a business journey as
made as part of work, or a journey to a temporary workplace.
The BIK exemption also applies to
private journeys classed by HMRC as insignificant, such as one-off trips.
Van leasing provides comprehensive service and
maintenance options, which can relieve much of the burden of ongoing
Another big difference between
leasing and owning a van outright is the whole issue of depreciation.
In fact, leasing a van means
depreciation isn’t an issue at all.
When it comes time to trade yours
in, you simply wait until the end of your lease agreement then switch to a new
Along with the tax benefits of
leasing a van, these can add up to a smart business decision when it comes to
your company vans.
LetsTalk Leasing has a large number
of vans and we can offer customers special van
leasing deals for businesses all over the UK – simply speak to our sales
team to find out more.
To find out more about leasing
commercial vehicles with LetsTalk Leasing,
simply, drop us an email at email@example.com or
give us a call on
0330 056 3331. Alternatively, you can enquire here by filling
in a short enquiry form.