Can I claim VAT back on a Private Number Plate for a Business?
Personal number plates can be a great option for businesses and business owners in general. Ultimately, with a personal number plate, you can make sure that your company stands out on the road. It can even work as a subtle form of advertisement or promotion. It’s certainly possible to get a personalised number plate that in some way reflects what your business has to offer or even matches your company name.
Of course, you might be aware of the cost of personal licence plates. Depending on the level of personalisation this may be a bigger bill than you want to take on in your company. However, there’s good news because you might just be able to claim tax relief and claim VAT back. To do this, you need to be able to show that the plate was purchased for business purposes.
Is It A Capital Allowance?
When you purchase a car or van for your business, you can claim this as a capital allowance. Capital allowances include assets such as equipment, machinery and vehicles like vans and cars or even trucks. Through capital allowance, some or all the value of the vehicles that you purchase for your business can be deducted from profits before the company deals with the tax for that year.
Unfortunately, the personalised number plate can not be claimed as a capital allowance. The reason for this is that the cost of the number plate does not come from the physical product itself but rather the right to use that particular number plate on the product. As such, this is an intangible asset, and intangible assets are treated differently compared to a capital allowance
Claiming A Personalised Number Plate As An Intangible Asset
The first thing you need to be aware of about intangible assets is that the tax relief is claimed over the years that the asset will be used in your business. Typically this will be between five and twenty years. The value of the personalised number plate needs to be written down in your financial records for each year.
It’s worth pointing out that under the law, if the personalised number plate is being used for a non-business purpose, then it will be excluded from the intangible assets regime. Therefore, you will need to be careful which cars you claim on, particularly if the vehicle if owned personally by yourself. It can be difficult to show that a plate is being used for business purposes however intangible assets can also allow you to claim on commercial assets. This is a much easier argument as number plates tend to rise in value. Thus this can be marked as a form of investment.
Claim As A Capital Item
If you don’t want to claim the cost over the total number of years then you should consider treating it as a capital item. By doing this, you need to work out the loss or gain when you eventually sell the personalised plate on. This will be compared to the original cost that you paid. One of the benefits here is that you can take advantage of indexation allowance. So, when you do look at the gain on the original purchase cost, inflation is taken into account.
Personalised Number Plates For A Personal Vehicle
You may be considering getting a private number plate for a business vehicle that you own. This is often quite popular with business owners and managers. It allows them to impress large or important clients by showing they have money to spend and ensures that their car stands out as a business vehicle. It’s a great choice, but how does the tax work? Remember, this isn’t a company car, and yet the tax will usually work the same way.
Though, there is a slight benefit that will be equal to 20% of the value for the purchase cost of the plate each year. This will need to be entered on a P11D. Since this will result in a personal tax for the business owner and a Class 1A NIC for the business, the tax relief is neither efficient nor advisable.
What’s The Best Option?
If you are eager to claim a private reg plate as tax relief, you are advised to treat it as an intangible asset rather than claiming once you sell. This is a far more efficient option and is easy to handle as long as you make sure that you do keep on top of your records and accounts. Generally speaking, you will be able to claim more through this regime.
As you can see then, you don’t have to worry about not being able to claim tax relief for personal number plates. There are two options to consider and it is your choice which one you use. However, if you speak to your accountant, they may have a preference.