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Sole Trader Car Lease - Help required

  • 09-09-2010 7:16am
    #1
    hofmannmarkus
    Registered Users, Registered Users 2 Posts: 3 ✭


    Hi

    Three years ago I bought a car derived van with a 3 year finance package. The car is now paid off and the bank offered me three options:

    1) Purchase the asset through Leased Asset Disposals
    2) Trade in or sell
    3) Continue to lease the asset (350/year)

    I have no idea what consequences 1 and 3 have. I want to keep the van so option 2 is not relevant.

    Can anyone explain to me why I should not go for option 1? Does this have tax implications?

    Many thanks in advance.

    M


Comments

  • #2
    seco
    Registered Users, Registered Users 2 Posts: 81 ✭✭seco


    Option 1 is the way to go but you should be aware that this is the way the finance company removes the vehicle from their books and the values used by them more often than not do not reflect the commercial worth of the vehicle. You should be further aware that there are tax implications if the vehicle is used in your business as the credit note issued by the finance housee in the leased asset disposal scenario is deemed to be a taxable receipt ie it is effectively treated by Revenue as Income. The way to deal with this and to reduce the credit note value is to obtain a valuation from a motor dealer of the current worth of the vehicle and submit it to the finance house advising them that the credit note value advised by them does not reflect the commercial value of the vehicle. They should then issue a revised invoice and credit note reflecting the valuation amount provided by you. This should save you some tax. Note that you will be able to claim capital allowances based on the invoice provided by the finance house. There is technical guidance provided on the Revenue Website which deals with leased asset disposals and tax treatment but the above is a laymans summary of same. Note also that there are VAT implications if you are VAT registered and have claimed VAT back on the lease payments as again, the credit note VAT is deemed to be VAT on the sale of the vehicle and you can claim back the VAT on the invoice issued by the finance house.


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