Using A Vehicle For Business – Pt 5

Tax Implications of Using a Vehicle For Business – Article 5 of 7

Today we look at tax implications of common methods of finance for a commercial / van – Lease, Hire Purchase & PCP.

A simple example – a van retails for €24,600 – (€20,000 + €4,600 VAT). With HP you can claim back all the VAT on day 1 whereas with say a 36 month lease you claim back the VAT over the 36 months.

But what about the €20,000? With HP you will write that off over 8 years whereas with the 36 month lease you will write if off over 36 months (plus a nominal secondary amount for a further 5 years).

Summary: While HP offers an initial cash flow advantage on VAT the lease will result in a quicker tax deduction for the full cost.

There is also PCP, although this is more common for cars. If used for a commercial it is more akin to a rental agreement for tax – VAT reclaimed each month and net payments straight to the P&L a/c. If used for a car the amount claimed for tax will be linked to emissions.

Tomorrow we look at claiming tax free mileage payments in a Ltd. Company when you use a personal car for business journeys.

This series of articles are for illustrative purposes only and do not constitute professional advice. To get in touch please e-mail dave@fhm.ie.