I’m about to buy a van for the business. In the past I used the family car and used the 0.45 per mile to calculate my expenses. If I buy the van through the business, what do I need to do for accounting purposes? I assume that I do the opposite in the sense that I would deduct personal mileage. Also, I will have to pay for it through cash from 2 different bank accounts. If I can purchase this as for the business, how do I then account for this purchase from the non-business account?
Also, do I then put all van related expenses, such as insurance, breakdown cover, repairs etc. through the business account?
I am looking to buy this today so if someone can help me out urgently before I buy it that would be great in case there’s some major issue I need to be aware of. Thanks.
I’m not an accountant, but I’ll try my best to advise.
From my understanding, you can only apply one type of accounting for vehicles - you either claim the going rate for mileage (currently £0.45 per mile), or you can put the expenses through the business (insurance, maintenance, road tax etc.). I’d guess that by buying the vehicle through the business, you would need to do the latter.
I think at the end of the day, your accountant would be the best one to advise you on this and could give the advise tailored to your situation (and would be correct). If you don’t have an accountant, you can contact one through QuickFile using this button on your dashboard:
I’ve also found these links from a quick search which may be of use to you:
@QFMathew - thanks for your prompt reply. The links are very helpful.
I suppose I should have a tag line for all posts:
Sole Trader. No, I do not have an accountant. I am not VAT registered
I agree that you can only have 1 way of claiming, and putting all expenses through the business is not the complicated bit. It’s how do I account for the personal mileage in the sense of the transaction in QF? logically, it seems to me to be the converse - ie. pay 45p per mile (for 1st 10,0000 miles) for each personal journey.
As I understand it, if you put the vehicle through the business accounts as an asset then you need to work out the proportion of private vs business use (by recording all your journeys, both business and private). If you do (say) 70% of the miles for business and 30% for private purposes then you can claim 70% of the running costs (fuel, servicing, etc.) as a deductible expense of the business, and capital allowances on 70% of the purchase price.
So I’d put everything through the books during the year, then correct with a journal at year end once you know the business proportion.
I think what @ian_roberts has suggested would be the best way to do it, but as far as I’m aware, neither of us are accountants (I’m certainly not, but correct me if I’m wrong @ian_roberts!).
No, I’m not an accountant, I’m simply someone who has just finished my first year trading, during which we’ve hit the VAT threshold, bought various new assets, etc. so I’ve had to do a lot of reading of the various HMRC guidance documents…
Thanks. If that’s the case then it seems easier to do it the way I’ve been doing, ie. claiming business mileage on a personal vehicle. Just seems a bit odd doing it that way as if I was intending to do more personal mileage than business I wouldn’t be buying a van!
But I suppose having a simple log book in the van to record every journey wouldn’t be too much hassle.
What about the initial issue that I have now in that I am going to purchase the van using cash from my personal bank (as I didn’t have enough in the business account)? If the van is a business asset then it should be reflected as a business purchase.
How does that then show up as a business expense? I’m no accountant either, but surely buying a business van is counted as business expense? I thought the Proprietor’s Account was simply for tagging drawings.
It would have been a heck of a lot easier if this had all been paid for through my business account, I know.
The drawings account, although called “drawings”, should be treated as just your personal bank account. So if you pay for an item for the business out of your own pocket rather than the business’, you can tag it as paid from there.
What makes it show on your accounts is the purchase invoice, so as long as that’s in place, it will show up on your P&L, Balance Sheet etc.
I see. So just create a purchase invoice and tag it as paid through through the Proprietor’s Account and it’ll sort the rest. I should have said that some of the money will be from the business account though. Not wanting to give actual costs away but if the van cost £1000 and I took £200 from Proprietor’s Account and £800 from business account, how do I log the payment from 2 sources?
Yes, of course. Wasn’t thinking straight. Thanks for all your help. Probably need some help doing the journalling of the private vs. business mileage part as well.
The journalling should be pretty straightforward once you have your mileage log at the end of the year and you know that (e.g.) 83% of your miles were for business. You’d just look at the total (debit) balance of each nominal account related to the van at the end of your year and create a journal to credit 17% of that value to the same account to cover the private use. Once you’ve done that for all the relevant nominals you’ll see a total at the bottom of the credit column in the journal, which you balance with an equivalent debit to the proprietor drawings account.
@ian_roberts -Btw, what is the cost of the purchase of the van in terms of accounting and tax? Does it come under Capital Expenditure? Never bought a business vehicle before so all new to me.
This is the point at which I would contact my accountant… I’d put the purchase price through QuickFile as 0050 Motor Vehicles, which would make it appear as an asset on the balance sheet rather than an expense on P&L. But I’d want a second opinion on how best to claim it against tax as capital purchases work differently from regular revenue expenses.
Just to add my 5 cents to the end of the discussion it is classed as an asset if brought for the business and then capital allowances are applied, restricted by the element of personal use.
