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Buying A Van For Business As A Sole Trader

Buying A Van For Business As A Sole Trader

Buying a van as a sole trader can be a great investment but isn’t a decision that is taken lightly. After all, they aren’t cheap and they depreciate in value.

Apart from the obvious practical benefits, such as being a helpful and safe way to travel for you and your work-mates, they are great for transporting equipment. If you play your cards right and get good signage, they can also be a brilliant way to advertise as you drive too. All for a fixed one-off cost.

What about the financial considerations too? In this article, we discuss the impacts of those in the various ways you can get your own van for the road.

Types of work that Require a Business Van

  • Courier businesses – The storage space allows bigger and more items to be carried before returning to the depot. This saves fuel but also time when working.
  • Construction – The building trade always have plenty to carry and an open flat transport space is invaluable. Operating without a van in this industry is extremely challenging.
  • Domestic improvement/repair businesses – All industries from White good repair, painters, decorators, electricians can probably all justify the benefits of at least a small van to operate more effectively in their chosen trade. Carrying (especially securely) the equipment they need for current work means that a car boot quickly becomes impractical.
  • Mobile beauty and grooming services – A van is the perfect way to transport your mobile beauty and grooming equipment to and from appointments.
  • Food delivery services – Some of these vans can be modified to keep things even cooler but either way, transporting larger amounts of food, cannot be done in multiple trips. It usually needs to arrive in one run.


Eligibilty for a Business Van

Both sole traders and limited companies can hold a van and look to claim tax relief. Remember that a limited company is a separate legal entity. In both cases tax relief can be applied for and the reverse is true that personal use has to be declared.

how does HMRC classify a van

How does HMRC classify a Business Van?

If a van is solely being used for business purposes, then it will be classified as a commercial vehicle and there will not be a liability for personal tax on it. If the vehicle is also used for personal trips, then it is considered a ‘duel purpose’ vehicle and there will be a proportional tax to pay. It can often be easier to justify that your van is purely a business-use vehicle. Basically, it is more obvious and believable that it might be in many businesses. In theory, this shouldn’t come into it as it either is or isn’t just a business vehicle. Your accountant will happily advise on this though.

Limited companies ‘owning vans’ are not subject to the same personal tax rules.


Methods of Purchase


Buying a business van

In this scenario, you own the van outright from the start and the van becomes a business asset. An advantage here is also if you do not know, or want the flexibility of how many miles you can do in it. You should be able to offset the capital allowance of the van against your profits to reduce your tax bill.

The downside of this method of ownership is the upfront cost. This isn’t always possible. If the capital is there or can be raised and you are determined to own your own van, this is often a good method, especially if you require it for a few years.


Renting a Business Van

By renting a van you are committing to monthly payments. You will usually have the option to purchase the vehicle at the end of the rental period but this isn’t always the case and you will not know the exact cost of that at the start of your agreement. This is a good option if you are not sure whether you want to commit to buying a van outright or if you need the van for a longer period of time or don’t have the upfront capital to afford to be able to purchase.

Care is needed in relation to your tie-in period and the cost if any damage that is deemed more than standard wear and tear. There are likely to be additional costs if you go over any agreed mileage rates and these can be quite steep to protect the vehicle asset costs.


Leasing to Buy a Business Van

This can almost be considered a hybrid model. Basically, you lease the van initially but have a guaranteed option to purchase at the end of the rental period. This can be a good option if you don’t have the upfront capital but are confident that you will need the van for a longer period. Consider the reliability of the van you are purchasing and the type of work it will be doing for you. If you plan to keep a reliable van for a while then the depreciation rate will often be less after the first few years.


VAT on a Business Van

If you are currently vat registered, then you will be able to reclaim back any vat paid on your van. The amount of this will need to be discussed with your accountant and will depend upon the value of the van itself. The standard rate is 20%. As always, all invoices and receipts must be stored and presented in your vat return for such a claim.



van road safety

Insurance Considerations

When you are insuring your van, make sure that you have the correct level of cover. This first means that you need to insure your van for its market value and not for its replacement value.

You will also need to make sure that you are covered for all of the activities that you will be undertaking in your van and clearly declare that this is a work vehicle and not just for use going to and from a ‘usual place of work’ if your destinations are varied. If you are going to be carrying passengers then you will need to make sure that you have passenger liability insurance.

Be careful with any equipment stored in the van – even for short periods of time. There is usually a fairly low limit of cover for items and work equipment can be expensive. Business vans are often the target for thieves looking for a quick grab and run. Electrical equipment can sometimes be light and easy to sell on.

Get multiple quotes and try to find insurance companies that specialize in business vans and they are likely to be the most competitive in their quotes.


Advantages of Fleet Insurance

If you are reading this article is is more likely that you are looking for your first vehicle and it may be a while before you expand. However, if you are expanding quickly or this isn’t your first van, then at this point it is worth mentioning fleet insurance. This is insurance that covers multiple vehicles under a single overarching policy. It can be much cheaper than ensuring each van separately and it can also give you peace of mind knowing that all of your vans are covered.

Fleet insurance gives you the advantage of not having to worry about keeping track of multiple insurance policies.



van road safety


Final Thoughts


Buying a van for business as a sole trader can have many advantages for a huge number of businesses. It’s important to understand the legal and tax implications of owning a van as well as the responsibilities that come with it.

Once you have considered all of these factors, you can then start to look at the different finance options available to help you spread the cost of buying a new van and compare van insurance quotes to get the best deal for your business.



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