Tax Relief on Commercial Vehicles

Tax relief

Generous tax deductions are available for plant and machinery used for the purposes of carrying on a qualifying activity or trade.  The tax relief is given in the way of capital allowances.

For the purposes of capital allowances certain vehicles such as vans, lorries, motorcycles and some double cab pickups are considered to be plant and machinery.

Sole traders and partnerships may be able to claim 100% Annual Investment Allowance (AIA) and deduct the full cost of the vehicle from their taxable profits.  For expenditure incurred between 1 April 2021 and 1 April 2023 limited companies may claim the enhanced 130% super-deduction for new and unused vehicles which are deemed to be plant and machinery.  

Alternatively, goods vehicles which are new and have zero emissions may attract 100% first year allowances (FYAs).

Vehicles which are designed primarily for the private carriage of passengers do not qualify as plant and machinery and a reduced level of capital allowances are available. http://www.pattonrainey.co.uk/?p=543

VAT

The VAT incurred on the purchase of a van or commercial vehicle can be recovered in full.  If there is a private use element of the vehicle then an apportionment may be used but if the owner has another vehicle, then HMRC generally accept that any private use of the vehicle will be minor and incidental and a private use adjustment is not required.

The above information only addresses the tax relief which may be obtained when purchasing a commercial vehicle and does not deal with any benefit in kind which may arise if the vehicle is made available to an employee or director of the business.  Commercial vehicles generally result in a lower Benefit in Kind being charged to the employee.

Please contact our office if you require more advice regarding any accounting or tax issues.