Sole trader using finance to purchase a van

RS1069

Hi my sole trader client (not vat registered) in his first year of business, wants to know the preferable way of getting a van to be used 100% for his business. Can he claim full monthly payments on a lease including interest, or just the interest.
If he buys the van through finance, can he claim monthly payments including interest? Does he put just the total going out of his bank during a tax year through as capital purchase, and then the further payments through the next year?
Then any help on depreciation would be great. Does he put the whole cost of the van through in the first year at the applicable rate/percentage to depreciate, or just the part he has paid for?

douglasstroud

Not a very helpful answer I know, but it depends
What type of lease? operating/finance of if a purchase bought outright or on HP?
All have a different way of being treated for tax purposes,
Are you using cash basis or accruals for the accounts? Again makes a difference

RS1069

Thank you douglasstroud. I am suggesting he buys on hire purchase. I have checked HMRC website and it says AIA for the whole amount can be put through even though not all paid yet, but no interest is allowable to get tax relief on. I am still not sure. I always use accruals for my clients. That way I can put my bill through into their accounts.

douglasstroud

That is correct, if you buy on HP then you can claim all of the capital element in the year of purchase as AIA if that is beneficial, it may not be and you may wish to carry some over and then claim WDA in the following years.
You can claim the monthly interest as a revenue expense every month through the P&L just like any other expense.

RS1069

Thank you I didn’t know that about the interest. Sometimes gov.uk is ambiguous. Thanks for your help.