My wife and I are about to start a camper van rental business. We are trying to weigh up the ‘pros’ and ‘cons’ of running it as a limited company. There are a number of considerations, including: (1) P11D benefit-in-kind (BIK). The van will be rented through an agency and will be available for rent 365 days of the year. However, on occasion, if it has not been rented, we may decide at the last minute to use it ourselves. We run various other businesses and are very busy, so this will be the exception rather than the rule. Is HMRC likely to treat it as being available for personal use from a BIK perspective even though we are not using it? I have discussed this with our accountant, and he feels that it is a fair rationale to say that while it is available for rent, it is not available for personal use. Any other perspective would be gratefully received. (2) Transfer of ownership. We have not yet set up the company but have bought the van in preparation. Is there any problem selling the van to the company at cost? (3) Will we be able to claim 100% capital allowances and roll the loss forward to offset against tax in a future year, or would it be better to depreciate the asset?
Arthur Weller replies:
(1) After looking at HMRC’s Employment Income manual at EIM23300, EIM25170, EIM25175 and EIM25105, I cannot agree with your accountant that while the vehicle is available for rent, it is not available for personal use. In my opinion, it is still available for personal use. However, at EIM23021 HMRC states (in similar words) 'A car or van is not made available by reason of employment where the employer's normal business is the hire of cars or vans and the employee hires the vehicle on the same terms as a member of the public'. (2) There is no problem in selling the van to the company at cost. This assumes that the cost is still the market value of the van. However, it is well known that after initial purchase, vehicles immediately go down in market value. See HMRC’s guidance at EIM21660 and EIM21661 about selling an asset to a company at an overvalue. (3) If you look at HMRC’s Capital Allowances manual at CA23084 and CA23510, you can see that this is a 'car', and consequently not eligible for the 100% annual investment allowance for capital allowances purposes. See also HMRC’s guidance at CA23110 that since this vehicle is for hiring out, first year capital allowances are not available.