All entrepreneurs at some point rely on a vehicle to help them run their business. The only problem is that nobody wants to talk about it. It seems that discussion of one of the biggest costs in business has been eschewed in favour of talking about the latest tech tools and app.
When it comes to commercial vehicles, most entrepreneurs have a lot of questions. For instance, what type of use constitutes business or personal use? And, how do you deduct your mileage from your tax bills?
Like many parts of business, it’s just another process that you need to be aware of so that you get the best deal for your business and yourself.
Think About The Driver
The first question to ask is who will be driving the vehicle. As the owner, you’ve got a lot of control over how you drive, and so if you’re the sole driver of a vehicle in your commercial fleet, insurance will be lower. When you start adding more people to the vehicle’s insurance, prices start going up fast, especially if the people you’re adding have a poor driving record.
What’s more, if your employees crash, you are personally liable for any injuries caused to them while out on the road. This means that you’ll need to take out extra insurance cover should anything happen to your staff or a third party as a result of their actions.
Finally, make sure your vehicles are safe for the driver. If your employees make a lot of deliveries, make sure your vans are kitted out with anti slip plywood that’ll keep them rooted to the ground in wet conditions. Also, ensure that your vehicles are regularly serviced to ensure that their brakes are powerful and their tyres are grippy.
To Lease Or To Buy
Another consideration for entrepreneurs is whether to lease a vehicle or to buy one outright. For businesses, there is usually a slight advantage for leasing. Lease expenses are usually fully deductible from your profits, meaning that you can pay less tax on your total revenue. Leasing also helps you to preserve your precious capital, which may be limited, especially as you’re starting up.
Taxable Business Expenses
As a general rule of thumb, if you own a business vehicle, you shouldn’t use it for personal use. If you do, you could be forced to declare some of the vehicle’s value as income.
If you do decide that you need to use a vehicle for both personal and business use, then start tracking business-related mileage. The government allows companies to deduct expenses on a per-mile basis for their vehicles which means that they count as business costs. Most businesses prefer to deduct business costs on a per diem basis. Some, though, may find it advantageous to deduct the actual expenses that they incur – whichever is cheapest.
If you’ve got an accountant, you should consider discussing your vehicle arrangements with them. Usually, they’ll be able to tell you which option is right for you.