Can You Claim Capital Allowances on a Second Hand Van for Your Dental Practice?

Yes, you can claim capital allowances on a second hand van used for your dental practice, provided the van is used wholly or partly for business purposes. The rules differ from those for cars, and the relief available depends on whether you are a sole trader, partnership, or limited company. This article explains the specific rules for UK dentists buying a used van for practice-related travel.

Capital allowances let you deduct some or all of the value of a business asset from your profits before you pay tax [1]. For a second hand van, the most common route is the Annual Investment Allowance (AIA), which gives 100% relief on qualifying expenditure up to £1 million per year [1][2]. However, there are conditions and exceptions that every dentist should understand before making a claim.

What Counts as a Van for Capital Allowances?

HMRC defines a van as a vehicle built primarily for transporting goods, not for private use. Motorcycles, lorries, vans, and trucks do not count as cars for capital allowances, so you can claim AIA and some first-year allowances on them [3]. A car, by contrast, is a vehicle suitable for private use that was not built for transporting goods [3].

For a dentist, a van might be used to carry portable dental equipment, instruments, or supplies between multiple practice sites, or for home visits. If the van has rear seats and windows suitable for private use, HMRC may reclassify it as a car, which would restrict the allowances available. Keep the van's primary design purpose in mind when purchasing.

Annual Investment Allowance (AIA) on Second Hand Vans

The AIA provides 100% tax relief on qualifying plant and machinery expenditure up to £1 million per year [1][2]. Second hand vans qualify for the AIA as long as they are unused and not previously owned by the claimant [4]. In practice, this means a van you buy second hand from a dealer or private seller qualifies for AIA, provided you have not previously owned it.

For a sole trader or partnership using the accruals basis, the AIA is available on vans. If you use the cash basis, you can only claim capital allowances on business cars, not on vans [1][2]. Most dental associates and principals use the accruals basis, but check your accounting method before claiming.

If you are a limited company, the AIA is also available. Full expensing (a 100% first-year allowance) is available for new and unused plant and machinery from 1 April 2023 to 31 March 2026, but this does not apply to second hand assets [4]. For a second hand van, the AIA is the correct route.

Example: AIA on a Second Hand Van

Dr Patel, a practice principal, buys a second hand van for £18,000 to transport equipment between her two practice sites. She is a sole trader using the accruals basis. She can claim the full £18,000 as a capital allowance in the year of purchase, reducing her taxable profit by that amount. If her marginal tax rate is 40%, this saves her £7,200 in income tax.

Writing-Down Allowances for Second Hand Vans

If you do not use the AIA, or if your AIA allowance is already used up on other assets, second hand vans fall into the main rate pool for plant and machinery. The main rate writing-down allowance is 18% per annum on a reducing balance basis [4]. This means you claim 18% of the van's value each year, with the remaining balance carried forward.

For a van costing £18,000, the first year's allowance would be £3,240 (18% of £18,000). The next year, you claim 18% of the remaining £14,760, and so on. This is less generous than the AIA but still provides ongoing relief.

Note that the main rate for cars is 14% (or 18% before April 2026) [3]. Vans are treated more favourably than cars in the capital allowances system, which is one reason dentists often prefer vans for business use.

Private Use of a Practice Van

If you use the van partly for private journeys, you must apportion the capital allowance claim. Only the business-use proportion qualifies for relief. For example, if you use the van 70% for practice visits and 30% for personal trips, you claim 70% of the available allowance.

HMRC expects you to keep a mileage log or other records to support the business-use percentage. If you do not, they may disallow the claim or restrict it to a lower proportion. For dentists with multiple practice sites, the business-use proportion is typically high, but you should still document it.

If the van is provided to an employee (for example, a practice manager or dental nurse) and they have private use, the benefit-in-kind rules apply. The van benefit charge is lower than for cars, but it is still reportable on a P11D. Speak to your accountant about the specific rules.

Vans vs Cars: Key Differences for Dentists

The capital allowances treatment of vans is more favourable than for cars in several ways:

  • AIA eligibility: Vans qualify for AIA; cars generally do not (except electric cars with 0g/km CO2 emissions, which qualify for 100% first-year allowances if new) [3].
  • Writing-down rates: Vans attract 18% main rate; cars attract 14% main rate (or 6% special rate for high-emission cars) [3][4].
  • Private use: Both require apportionment, but the van benefit charge for employees is lower than the car benefit charge.
  • Second hand electric vans: Second hand electric vans qualify for main rate allowances (18%), not the 100% first-year allowance available for new electric vans [3].

For a dentist who needs to carry equipment, a van is often the more tax-efficient choice compared to a car. However, if the vehicle is primarily for personal travel with occasional business use, a car may be more appropriate.

What About Leased Vans?

If you lease a van rather than buy it, you cannot claim capital allowances. Instead, the lease payments are deductible as a revenue expense. However, there are restrictions on the deductible amount for cars with CO2 emissions above 50g/km. For vans, the restrictions are less severe, but you should still check the lease terms.

For a finance lease (where you effectively own the van at the end), capital allowances may be available depending on the structure. This is a complex area; consult a dental-specialist accountant for advice.

Practical Steps for Claiming Capital Allowances on a Second Hand Van

  1. Check your accounting basis: If you are a sole trader or partnership using cash basis, you cannot claim capital allowances on vans [1][2]. Switch to accruals basis if needed.
  2. Determine business-use percentage: Keep a mileage log for at least three months to establish a reasonable estimate.
  3. Choose AIA or writing-down allowance: If you have sufficient AIA headroom, claim 100% relief in year one. If not, use the main rate pool.
  4. Record the purchase price: Use the actual cost paid, including VAT if you cannot reclaim it. If you are VAT-registered and reclaim the VAT, use the net cost.
  5. Include in your tax return: Claim the allowance in the capital allowances section of your Self Assessment (for sole traders/partnerships) or corporation tax return (for companies).

Common Mistakes Dentists Make

  • Claiming AIA on a van used 100% privately: Only the business-use proportion qualifies. HMRC may challenge claims where private use is significant.
  • Treating a van as a car: If the van has rear seats and windows, HMRC may reclassify it. Buy a panel van or commercial vehicle to avoid this.
  • Ignoring the cash basis restriction: Many sole trader dentists use cash basis without realising it restricts capital allowances on vans.
  • Not keeping records: Without a mileage log, you cannot substantiate the business-use percentage if HMRC enquires.

When to Speak to a Dental-Specialist Accountant

The rules around capital allowances on second hand vans are straightforward for most dentists, but the interaction with your accounting basis, VAT position, and private use can create complications. A dental-specialist accountant can help you structure the purchase correctly and maximise your relief.

If you are considering buying a van for your practice, contact us for a free practice health check to review your current capital allowances position. We also offer practice accounting services tailored to UK dentists, including advice on vehicle purchases and tax planning.

For more guidance on tax-efficient practice spending, read our associate tax survival guide or practice profit extraction guide.

Sources

  1. gov.uk: Claim capital allowances: Overview - GOV.UK
  2. aka.hmrc.gov.uk: Claim capital allowances: Overview - GOV.UK
  3. gov.uk: Claim capital allowances: Business cars - GOV.UK
  4. icaew.com: A lowdown on full expensing for SMEs - ICAEW.com