Are You VAT Registered?
Before you consider what size and use of van you'll need and consider what your business can afford - there is a vital question that you must consider - are you VAT registered?
If you are, you can reclaim the cost of the VAT on the van in full in your VAT tax period. If you are not VAT registered, you cannot reclaim the VAT. If you hire or lease the van and are VAT registered, the rental costs will be calculated based on the VAT exclusive price and you will be charged VAT on those rentals, which can then usually be fully reclaimed in your VAT calculation. So if you are VAT registered, hiring or leasing your van makes good sense as it's very cost effective. At the end of your lease, you simply hand the van back and settle any refurbishment or excess mileage costs.
If you are not VAT registered though, don't despair. If you buy or hire-purchase your van, the cost of the van can usually be offset against your annual tax liability, and the interest you pay can also be offset against your business tax, as its a business expense. At the end of the hire-purchase agreement the van fully belongs to you, and you can either keep using it, or trade it for a newer van.
So VAT is a key consideration in assessing which finance method is best for you and your van. Your accountant will give you the best advice on what to do.
OK what are some of the other factors?
What do you intend to use the van for?
How long do you intend to use the van for?
And of course, crucially, how much money you have.
If you're only going to use the van for a few months for example, you're unlikely to want to purchase a van, however, if vans are a crucial part of your business, then financing a van could be a better option - it is all about what best meets your needs.
This blog looks to explore the different options so you can confidently choose the correct one for you. So let's begin!