Sole Trader - Diesel or Petrol Car

ButtermilkJack

Hi, I've just handed in my notice in work and will be full-time self-employed from January. I have been operating as a sole trader for the last year and a half already.

I own a petrol car and so far have been claiming the odd petrol receipt here and there as an expense and my accountant has allowed for a portion of my running expenses (car loan, insurance, tax etc) to be added to my business expenses.

My question is this. Bearing in mind that I will be full-time self-employed, should I continue as I am or trade my car for a deisel carvan or similar to claim vat on the purchase and the fuel (if this is allowed ). Which option would be more beneficial, considering that my mileage would not be huge. I will be working from home and only drive for meetings, supplies etc.

Thanks!

tom-thebox

Depends on what you are paying yourself, if you put yourself on a decent wage, 5, 6k a month you will be killed on BIK, what does your accountant recommend?

ButtermilkJack

Cheers tom,

I haven't actually spoken to my accountant yet. I was just trying to get an idea of how many things I need to sort out before January, so if it was a clear-cut choice one way or the other then I'd add it ot my 'to-do list'

I won't be paying myself anything near €5k/€6k a month. Not for the first year anyway as I'll be barely scrapping by I'd imagine for the first 6 months.

I'm off now to do a quick search through posts for the basics of BIK. Not too sure on what goes on there

Thanks!

ThomasH

Hi ButtermilkJack

I own a petrol car and so far have been claiming the odd petrol receipt here and there

As far as I know you if you're business is registered for VAT you can only claim VAT back on diesel and not petrol. Better check this with your accountant.

My question is this. Bearing in mind that I will be full-time self-employed, should I continue as I am or trade my car for a deisel carvan or similar to claim vat on the purchase and the fuel (if this is allowed ). Which option would be more beneficial, considering that my mileage would not be huge. I will be working from home and only drive for meetings, supplies etc.

If you are in a position to claim VAT (Registered for VAT) then yes it makes more sense as you can claim the VAT on diesel back for business purposes and yes you can claim the VAT on a trade-in on a commercial vehicle, which is also more beneficial to you.

Check the VAT area on www.revenue.ie for more details

Baby4

This post has been deleted.

ButtermilkJack

ThomasH wrote:

As far as I know you if you're business is registered for VAT you can only claim VAT back on diesel and not petrol...

That's correct, but I was only claiming a petrol receipt as an expense, not claiming the actual VAT on the purchase.

ThomasH wrote:

If you are in a position to claim VAT (Registered for VAT) then yes it makes more sense as you can claim the VAT on diesel back for business purposes and yes you can claim the VAT on a trade-in on a commercial vehicle, which is also more beneficial to you.

Yes, I am actually registered for VAT so perhaps the best option is to 'go diesel'. I'll have a look around the revenue site now and see what I can gather.

Cheers.

ThomasH

Baby4 wrote:

This post has been deleted.

Agreed but I think the OPs question is about claiming VAT and not VAT charge on sales

kluivert

Please check your advise before offering it.

There is no BIK for self employed individuals, only paye or directors.

You may not claim the vat back on the purchase of a motor vehicle unless its classified as commerical. Eg A car van, Commerical Van, Commercial Jeep etc.

You may only claim back the vat on diesel and not petrol.

In this situation there is no reall benefit to be gained but at least a portion of motor running expenses is going towards the business.

ButtermilkJack

Hi kluivert, thanks for clearing that stuff up.

Just a quick question so on that area. You say there's no real benefit in this situation, apart from a portion of motor expenses being claimed as expenses...

So, if I buy a commercial jeep for example, windows blocked out, VAT receipt, the works,

a) Do I claim back the VAT on the purchase in my bi-monthly VAT3 returns as I would any other VAT invoice?
b) Can I include the road tax, insurance, diesel and servicing etc (or at least a high proportion of it) as expenses, therefore reducing my overall liability for Income Tax come the year end?

If I can then that would be a big advantage for me over using my personal car, which I have to pay insurance, tax, petrol, servicing etc on anyway, but out of my net income after I've already paid my tax. Or can I claim portions of these anyway if i keep using it?

Sorry if this post is hard to follow, and I know I've asked these questions to some people before (and am grateful for the answers) so apologies if I'm stepping on any toes here , just trying to be double-sure!

Thanks.

XDA

As far as I understand it, if you have a commercial vehicle which is used solely for the purpose of your employment then all costs associated with that vehicle can be accounted for as a business expense. If you also have a private car which you use for social and pleasure then its easy to justify your claim that the commercial vehicle is only used for business.

XDA

kluivert

As XDA said.

1. Buy a commercail and calm back the vat.
2. All expenses in relation to the commercial vehicle is for business purposes.

Personally I would also include personal motor car in the accounts as well, and include relevant expenses, petrol Tax and Insurance but add back say 60% on your income tax return for personal use.

If you take out a Hire purchase to buy a commercial you can reclaim the vat in one go. If you take out a Lease to buy a commercial well then you claim back the vat over the life of the repayments.

ButtermilkJack

Cheers, I think I'll have to talk to my accountant... and then a garage about leasing/hp etc as I'm not really to clued-in on those areas.

Just to clear one point up though, I'll either be using my personal car or a commercial vehicle, but not both. I can't afford to keep both going. I already have a €15k loan on the personal car so my plan would be to trade that in for a commercial van or 4x4. Basically something of similar value or less. That way my repayments won't increase, but hopefully I'll be offsetting more of the expenses against income.

Obviously in this situation, a portion of the vehicle will have to be written off as 'personal use'. I'll have to talk to my accountant to find out how much this will be and will then need to decide if it's worth going commercial or just keeping the personal car?

Thanks!

Nuttzz

if you are going to be doing a lot of driving diesels are more economic in the long run and the oil burners arent bad preformers anymore

ButtermilkJack

If I'm not going to be doing a lot of driving (not business driving anyway), then would it still be an advantage?

Can I claim mileage rates for use of my personal car or this this just for employed paye workers?