Everyone wants to pay less tax, whether it’s income tax on personal earnings or VAT and business rates when running and building a company.
At a time when everything from the cost of fuel and energy to groceries and services seems to be constantly increasing, it’s no wonder that you want to know how to protect your tax break.
In this quick and easy-to-follow guide, we’re going to take a look at how you can protect your business tax break by buying the latest Land Rover Defender on a lease. Let’s take a look at the details so that you know your options.
What is a vehicle lease?
A lease is where you are essentially paying to use a vehicle that is owned by a leasing company. While you can buy a vehicle outright or you can take out a finance agreement that allows you to make a balancing payment and own the vehicle outright at the end, a lease is different.
The primary difference — and all the evidence shows that it’s a significant advantage for businesses — is that the leasing company owns the vehicle even when the agreement concludes. Although this might sound counterintuitive because you won’t have an asset on your books at the end of it, what you’re doing is maintaining a far greater degree of financial agility and flexibility. Why? Because you won’t have an asset that will depreciate by as much as 50% inside 2 years that you then need to sell to fund future purchases. Leases also offer tax breaks.
What tax breaks are available?
The biggest break is that your business can claim back the VAT on the monthly payments you make to the finance company. When you add up the cost of the repayments over the length of a typical 2-3-year agreement, this could come to several thousand pounds. The government has made this possible as a way of recognising the cost of doing business so that business owners can make their budgets go that bit further.
You can claim back 100% of the VAT if the Defender is used solely for business and 50% if you use it for a hybrid of business and personal purposes. The other bit of good news is that you will also be able to claim back the VAT on any maintenance and servicing packages you take out on the vehicle. Because the leasing company will always own the vehicle, you will likely have to pick from one of their pre-packaged maintenance contracts.
Do you have to be VAT-registered?
Yes, if your business is not VAT-registered, then you will not be able to claim back the VAT on your Defender. Registering to pay VAT is necessary when you earn more than £85,000 and is something that is also mandatory from day one in a number of industries. Speaking with an accountant or tax advisor will ensure that you get everything set up the right way, allowing you to claim your tax breaks so that your business never leaves money on the table.
Does extending the lease help save more on tax?
It may be tempting to think that extending the length of the agreement helps you save more and more tax. The reality is that by far the most common terms on which to get a Land Rover Defender on lease are 2-3 years because this allows you to minimise maintenance costs as the vehicle ages. The simple approach here would be to speak to a leasing specialist so that you can move to a newer model once the agreement finishes. When you consider that you can get a new vehicle without having to sell your old vehicle, there really is no advantage in trying to extend the length of an existing lease.
How else can you save money?
Searching for a Land Rover Defender with lower emissions could help you save money on travel charges to certain areas, such as the ULEZ in Central London. You can also opt for the newest model that is available to you so that you can reduce the probability of having to pay for maintenance. Many leasing companies also offer a range of fixed-rate maintenance packages that cover many of the common maintenance jobs that may arise. This is something to consider when you want to make your outgoings more predictable from one month to the next.
What’s your next step?
Speaking to a leasing specialist and your company accountant will ensure that you understand your options while at the same time meeting all of your tax obligations. A little additional forward planning really can make all the difference when you want to make sure that your money is always working for you.
Read more:
Protecting Your Tax Break: Buying the Land Rover Defender On a Lease
