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When is a business van not a business van?

  • 12 posts
  • # 78422

Can anyone shed some light on a matter I'm not quite 100% percent about.

If a business uses a van to carry out it's day to day duties but that van is not owed by the sole trading business owner but purchased for by a family member to help get started can the owner claim expenses such as fuel, repairs etc?

Any advise or help would be gratefully appreicated.
Liz D
  • 273 posts
  • # 78452

I personally would enter the receipts for fuel, repairs as one way of looking at it is as a hired van.  As long as the fuel and repairs/servicing etc can be attributed to the fact the the sole trader is utilising the van.  If not used solely for the sole traders business though e.g. owner going to the car boot sale on a Sunday, then make sure you calculate the business useage.
  • Member PM.Dip
  • Practice Licence
  • 44 posts
  • # 78510

Personally, I would be happy for them to claim the mileage allowance for business use (which is generally more generous than taking a percentage of the bills).  I beleive the HMRC refers to when the vehicle was 'aquired' by the sole trader not when it was purchased.  As long as the vehicle is legitametly being used for the business (and there is some sort of mileage log) I don't see a problem - just make sure any non business use is not claimed for.

Lucy 
  • 12 posts
  • # 78524

Hiya Liz D,

Your suggestion of looking at the business van as a hire van was kind of the train of thought I was considering but having other ICB member points of view is great to build a better understanding.
It all boils down to trust, character judgment and by word of mouth from the business owner that the van is solely being used for business and being 100% honest about it.

In this case the owner is very geniune and has been keeping a log of mileage when out doing business but also keeping all receipts for general running costs (fuel, repairs, road tax, etc) which is being debited from the business account.

I was getting slightly confused as to what is the better solution - treating as a hire van or using the mileage methodUndecided
  • 12 posts
  • # 78525

Hi LucyC,

As the van was aquired (bought and registered with DVLA by the business owner's family member) and solely used for business it sounds like it can be recorded in different ways depending on how the useage is being recorded by the owner.

The business owner keeps all the receipts of all the general running costs (fuel, Road Tax, repairs etc) which is paid from the main business current account as well as a mileage record.

That is why I was hoping to broaden my search with fellow ICBers as to how best to record it.

If recording the mileage method would I be wrong to say that all the receipts for general running costs would then have to be recorded as a drawing from the business?
  • Lifetime Member
  • 8 posts
  • # 78556

If you are claiming a mileage rate, you must debit all motoring costs to drawings and then, when you post the mileage allowance available debit it to motor expenses and credit it to drawings.  Provided you work on HMRC approved rates and an accurate log of business miles, this will result in a tax-claimable figure being shown in the profit and loss account.

The mileage allowance covers all motoring costs except interest on a loan to purchse the vehicle.  For employees the allowance covers everything.  Why there is this difference in treatment I have no idea.
  • 12 posts
  • # 78583

Hi Jonathan A,

I can fully understand where you're coming from and agree with how to record the mileage rate method as I have been doing just that with another client of mine.

What was making my little brain tick and thought it would be interesting to see what other ICBers views were on the scenerio of a business van being purchased and registered in someone else's name (family member of the business owner) who solely uses it for only the business.

Does that mean unless the van is registered in either the business name or in the owners name it should therefore be recorded as the mileage rate method?

It's intriguing how something that should be simple and straight forward produce different views!

Really appreciate your input into the subject.
Logie
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