I have an electrician client who is currently a sole trader with a van used in his business (100% business use). He is forming a Ltd Company with his friend for some big contracts they've won, but he wants to keep his sole tradership status for his own jobs as he is not happy sharing those with his friend.
Does anyone know how best to treat the van? At the moment, all costs are allowable because it is 100% business use in the sole trader, and going forwards it will still be 100% business use, but split between the Ltd Co and the sole trader. If he brings it into the company, then there will be BIK on the private use of the van, but he wouldn't be able to claim any costs in his sole trader. I could get him to keep mileage records and add back the sole trader costs in the company and them claim them as expenses in the sole trader, but then who should own the van?
Any help on this would be much appreciated, I'm going round and round in circles on this! The company will be vat registered, so that's another whole level of complication...
Hard to offer an opinion without having some sort of idea on the ratio of work (or van use) that your client will be doing in relation to being a sole trader as well as being a Director of the Company.
Depending on how much self-employed work he is going to be carrying out is it worth considering leaving the van registered to him and then charging the company at AMAP for using his own vehicle, that way there will be no BIK but he will have to allow for this in his sole trader accounts because the van will no longer be 100% business use.
The other thing, is his friend aware that he will be continuing to do his own work without him if not he might not be best pleased when finding out, I know I would not be pleased if I set up a business with someone only to find that they were keeping some of their clients to themselves.
-- Edited by Artois on Friday 8th of December 2017 02:52:30 PM
__________________
Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Just throwing a few things out there
Vat for sole trader - same trade, on a very sticky wicket if not.
Invoice company for use of van by ST
Rules for when changing way vehicle expenses are paid.
Shareholder agreement.
Same issue for van as with tools re replacement/use of etc
__________________
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
I'm not sure yet what the split will be between the sole trader/company work. I'm just trying to get my head around the options.
Just to answer you Joanne, the sole trader isn't vat registered but is the same trade. If this all goes ahead, he should become vat registered shouldn't he? Otherwise he's just avoiding vat on his sole trader income. Is it the total company turnover I need to add to his sole trader turnover to check whether he's over the registration limit? Or just his 50%? Argh, why can't clients just keeps thing simple!
You have to go back to why is the Ltd registering for VAT? Im assuming its because the forecasts are showing they will be over the threshold given the large contracts you mentioned. So if thats the case you need to ensure you avoid artificial separation(if thats whats goinng on, which on the face of it, it is, then you ignore the S/T t/o and register. (You would never use his % of the Ltd as a calc)
__________________
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
