What are the Tax Benefits of Leasing a Van?

Van leasing has become a popular choice for employers, sole traders, small businesses or fleet managers, due to the many benefits of van leasing deals. 

There are various flexible advantages as well as tax benefits that you can enjoy if you choose to lease a van for business purposes.

Van Leasing Tax Benefits 

Although there are tax liabilities associated with certain types of use of company vans, there are also ways to reduce the tax burden, and one of these is by leasing a van.

It is an alternative to owning them outright.

If a business enters a van leasing deal, it is treated, for tax purposes, in the same way as renting a vehicle.

The lease payments are a fully tax-deductible expense in profit and loss accounts.

If the company leasing its vans is paying VAT on the lease, then you can also reclaim this.

These tax benefits apply to contract hire leases, and the company will not have to pay VAT on its monthly finance payments.

Where the company has taken out a finance lease, it can offset these charges against its annual profits.

However, VAT is also recoverable on any service costs involved in taking out an optional service or maintenance package as part of the lease.

Other Benefits from Leasing a Van 

Leasing a van means the initial capital outlay is going to be less, supporting business cash flow requirements.

It also offers immediate access to a wider range of quality vehicles at affordable rates.

What is Company Van Benefit in Kind Tax? 

Companies that provide vans and fuel to employees have certain obligations when it comes to tax reporting. 

If an employee of a company drives one of its vans, they MAY be liable to pay benefits in kind (BIK) tax.

BIK applies if they use the van for their own private journeys in addition to business ones.

It is levied at a flat rate, but companies are obliged to notify the taxman.

From April 2020, the flat-rate van benefit charge rates will be increased, for the 2020 to 2021 tax year, to £3,490.

When Does Company Van Tax Not Apply?

Usually, Van BIK does not apply as if you use your van for business journeys exclusively, or the van has shared use, as a pool van, then there is no BIK tax to pay.

HMRC defines a business journey as made as part of work, or a journey to a temporary workplace.

The BIK exemption also applies to private journeys classed by HMRC as insignificant, such as one-off trips.

Van leasing provides comprehensive service and maintenance options, which can relieve much of the burden of ongoing operations.

Another big difference between leasing and owning a van outright is the whole issue of depreciation. 

In fact, leasing a van means depreciation isn’t an issue at all.

When it comes time to trade yours in, you simply wait until the end of your lease agreement then switch to a new model.

Along with the tax benefits of leasing a van, these can add up to a smart business decision when it comes to your company vans.

LetsTalk Leasing has a large number of vans and we can offer customers special van leasing deals for businesses all over the UK – simply speak to our sales team to find out more.

To find out more about leasing commercial vehicles with LetsTalk Leasing, simply, drop us an email at contact@letstalkleasing.co.uk or give us a call on  0330 056 3331. Alternatively, you can enquire here by filling in a short enquiry form.