Van Leasing And Get Tax Benefits

Van leasing is a viable option for businesses, self-employed people and those who are looking to lease a van for private use. Leasing a van is a better option than buying a new vehicle. Moreover, with tax benefits associated with van contract hire, it is definitely an option worth considering.

Better Than Buying A Van

More and more people today prefer to lease a van than to buy one. In these hard economic times, not everyone has the funds or is able to arrange for the finance to buy a new van. Suppose you are running a business and you need vans for your workforce, you would have to spend a lot of money buying these vans.

On the other hand, you can choose to lease vans. Van business leasing will help you avoid spending large sums of money to provide vans for your workforce. This is also a good option for those who are looking for a van for personal use.

Van leasing provides an affordable way to own a van. All you need to do is pay a small monthly rental charge and you can use the van for all your transportation needs.

Tax Benefits

Businesses and individuals who are opting for the finance lease option not only save money by doing away with the need to buy a new van, but also enjoy huge tax benefits. In fact, you can get all the benefits that are associated with owning a van.

If you are going to be leasing a van to avail of tax benefits, it is best to be aware of all the factors associated with this option. You should know what you will get as tax benefits and what you will not. A clear understanding of this issue will help you avoid making a mistake.

There are various ways to enjoy tax benefits with van leasing. When you lease a van you have to pay a small initial deposit. This deposit is usually equivalent to three months’ rental charge. During the duration of your lease term you have to pay a monthly rental charge. Since finance lease is classified as a hire agreement for income tax purposes, you can get 100% tax relief on your payments.

VAT Payments

Moreover, you pay a monthly VAT along with your monthly rental charges. If the VAT is registered, you can always claim it back every quarter. In order to have the VAT registered, all you need to do is agree to a contract period and monthly rental charges.

Some Things To Keep In Mind Regarding Tax Benefits

In order to get 100% tax benefits there are few things that you must understand about van leasing. First, the payments for your Mercedes van leasing (whichever model you have chosen) will be made through direct debit. Now if you want to get 100% tax benefits, you have to honor your contract term. In other words, you should not terminate your contract before the term expires.

If you do terminate your contract before the term expires, you will have to pay early settlement charges. The good part is that these charges are not as high as those associated with contract on hire.

The finance lease contract requires you to sell the vehicle at the end of the contract. This is because, when your contract expires the taxman will not give you tax benefits on both the ownership and lease. So you are legally required to sell the vehicle to get tax benefits.

However, since finance lease is very flexible, there are several options available to you. You can sell your van to a third party. You can then use the sale proceeds to make the balloon or the final settlement payment, if it has been included in the contract. The balloon payment refers to the final payment that you have to make after the contract expires. This payment is besides the monthly charges that you have been paying.

After making the balloon payment, the funds left are the profit that you have made. This profit is taxable.

The other option that you have after your Ford van leasing contract expires is to go for part exchange option. In other words, you can exchange your van for a new van. In fact, you do not have to wait for your contract to expire to avail of this option. You can do it any time.

When you exchange your old van for a new one, the company supplying the new van will request a settlement figure from your present finance company. If the settlement figure is less than the market value of the part exchange, you can use the difference to pay in full or part of the deposit on your new van.

On the other hand, if the settlement figure is more than the market value of the part exchange, you can add the difference to your new finance agreement. However, you will have to pay the deposit in full.

It is obvious that van leasing is a very good way to save taxes. However, if you are choosing this option to get tax benefits, there are few things that you should keep in mind. First, if you are leasing a van that has more than three seats, you might have to go through a very complicated tax process to get tax benefits.

Secondly, in order to get tax benefits, your van should not have glass in the rear part. It is best to check the policy in your area, because there are certain parts in the UK where this policy is not so strictly applied.

Third, in order to get tax benefits, the van has to be used for company purposes. This is simply because tax benefits are calculated on the basis of year end profits.

Once you are aware of all the issues and tax benefits relating to van leasing, you can make an informed decision for yourself and your company. After all, not everyone can lease a van and not everyone is qualified for tax benefits. So before you lease a van, make sure that you know whether you can avail of the benefits or not.