Whether you are a tradesperson taking on a larger job, a retailer needing extra delivery capacity or a business moving equipment between locations, there are plenty of reasons why you might need an additional van for a short period. Rather than purchasing another vehicle, short-term van hire can provide a flexible and cost-effective solution.
But can you claim the cost against tax? In many cases, the answer is yes. If you hire a van for legitimate business purposes, the hire cost can generally be treated as an allowable business expense, reducing the profit on which your business pays tax. However, as with most business expenses, there are rules surrounding what can be claimed and how the vehicle is used.
When Can Van Hire Be Claimed as a Business Expense?
HMRC's general rule is that business expenses must be incurred wholly and exclusively for the purposes of the trade. For van hire, this means there should be a genuine business reason for hiring the vehicle.
There are many situations where this could apply. A tradesperson might hire a larger van to transport materials for a particular project, while a retailer could need additional delivery capacity during a busy period. Businesses may also hire vans for moving offices, collecting stock, transporting equipment or temporarily replacing a vehicle that is unavailable.
HMRC includes vehicle hire charges among the motoring expenses that may be allowable for businesses. However, if the van is also used privately, the tax position can become more complicated. Where business and personal use can be clearly separated, you would normally only claim the proportion relating to business use. Keeping clear records of why the vehicle was hired and how it was used can therefore be important.
What About VAT and Other Van Hire Costs?
For VAT-registered businesses, there may also be an opportunity to reclaim VAT paid on van hire, provided the relevant conditions are met and the vehicle is being used for qualifying business purposes.
It is important not to confuse the rules for commercial vans with those applying to cars. For example, specific restrictions can apply to VAT recovery on leased cars where there is private use. The rules surrounding commercial vehicles are different, so businesses should check how their particular vehicle and usage are treated.
Other costs associated with using a hire van may also qualify as business expenses, including fuel and certain parking costs where they relate directly to business journeys. However, penalties such as parking fines are not generally allowable expenses. Keeping receipts and invoices will make it much easier to accurately record your costs.
Why Short-Term Van Hire Can Make Sense for Businesses
Tax deductibility is only one potential benefit of short-term van hire. For many businesses, the biggest advantage is flexibility.
Demand can change throughout the year. You might win a temporary contract, experience a seasonal increase in orders or simply need a bigger vehicle for one particular job. Purchasing another van for occasional requirements can mean tying up capital while also taking on ongoing costs such as insurance, maintenance and depreciation.
Short-term hire allows you to choose a vehicle suited to the task and hire it only for the period required. For businesses that don't need another van permanently, this can be a practical way to increase capacity without making a long-term commitment.
Final Thoughts
Short-term van hire used genuinely for business purposes can generally be treated as an allowable business expense, but individual circumstances can affect the tax treatment. Businesses should retain hire invoices and records relating to the purpose and use of the vehicle.
If you are uncertain about what your business can claim, speak to your accountant or tax adviser for guidance.
Need a van for a day, a week or a short-term project? Here at Skipton Self Drive we offer a range of hire vans to help local businesses get the right vehicle when they need it.
To book your next hire van with us, contact our team today on 01756 792911 or book online here.
