I have a client who has purchased a van on HP and just been checking the AIA on the HMRC website. I am not sure what they mean about claiming if bought under a hire purchase agreement. Can anyone explain this to me please?
Can you point us to the HMRC page that is confusing you.
Also, are your sure that this is HP rather than a lease and if it is a lease ensure that it's actually a finance rather than operating lease.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Yes definitely a hire purchase agreement as lists purchase price , charge for credit and monthly repayments etc....
I've copied the paragraph from Gov.UK : Claim Capital Allowances
When you can claim
You can only claim AIA in the period you bought the item.
The date you bought it is: when you signed the contract, if payment is due within less than 4 months when payments due, if its due more than 4 months later
If you buy something under a hire purchase contract you can claim for the payments you havent made yet when you start using the item. You cant claim on the interest payments.
If you dont want to claim the full cost, eg you have low profits, you can claim part of the cost as AIA and part using writing down allowances. You can do this at any time as long as you still own the item.
You can (but do not have to) claim the AIA on the entire amount of the vehicle in the period that you purchased it.
If you don't claim it in the period of purchase then AIA is not available for the asset and you will instead use normal WDA's.
You do not include interest in the AIA but rather interest is charged monthly as an expense to the P&L
The last paragraph seems badly written. AIA's are not available after the period of purchase, only WDA's are.
The key with AIA is that on an annual basis you either use it or lose it. It doesn't carry accross periods.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
sorry for my delay in replying. As Richard states the answer to your direct question is a straight yes but I was pondering more about the application of the percentage reduction due to private usage and what you would include.
If the business is incorporated then incidental travel and home to work where the van needs to be stored at the directors home overnight would not be classed as private mileage (totally different to car rules) but I'm not 100% sure that the same is true in the case of the self employed (for case law reference refer to Powell v Jackman) and would be interested to hear other peoples views on what seems to be another one of those anomalies like the self employed not having the option to claim mileage allowance if they go over the VAT registration threshold. .
Back to AIA on vans though as Richard states you can definitely claim up to 100% with reduction for personal use.
My question mark is over what denotes personal use rather than the fundamental reply.
Where's Bill (Wella) when you need him...
kind regards,
Shaun.
p.s. Can you post a link to what confused you and also state whether your client is self employed or limited. Also whether they are VAT registered. Many thanks.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The client is a sole trader, and not vat registered. What got me thinking was in the link I posted above the day it also gives an example of a laptop and states that if used for 50% personal use then you can only claim 50% AIA. But at the beginning of the document it says you can claim 100% AIA on plant and machinery including vans? Hence the confusion..
Its just a really badly written document Georgie. It should say "up to 100%" not just 100% as private usage will reduce the claim.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi Georgie
I think the issue of the links in HMRCs website it that is spawns other links - so you end up going off piste reading those as well, but thats often crucial.
You have quoted above an extract of the link, as opposed to the actual link (if that makes sense). The extract in itself is that you can indeed claim 100%, but then you have to start to consider all the other relevant facts eg who owns the van (self employed person, a limited company); who drives the van (self employed person; a limited company - Director, or just an employee) and where that van is driven.
So then you have to start looking at what needs to be included and excluded for the personal mileage so you can work out the amount of overall personal use, to then work out the AIA reduction. As Shaun rightly says there is an 'exclusion' for Limiteds for where the van needs to be stored at the directors home overnight. I do seem to recall reading about one off trips to the collect some shopping on the way home, but I would need to search the HMRC site (maybe try later if I get chance-Wish I kept a list of link favourites!)
Hope that helps!
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
