Ex - Demonstrator As A Company Car - Tax Implication?

Ex - Demonstrator As A Company Car - Tax Implication?

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DSLiverpool

Original Poster:

14,764 posts

203 months

Monday 13th October 2014
quotequote all
I thought if the vehicle was new to the company ie not having to be brand new, then you had the cap ex allowance - my accountant says not but is checking - any wise Erics about with a quick yay or nay.

Its time to get the Outlander hybrid but they are selling the demonstrators for a good deal

anonymous-user

55 months

Monday 13th October 2014
quotequote all
it has to be a brand spanker

from

http://www.hmrc.gov.uk/capital-allowances/fya/basi...

Low CO2 emission cars
FYA are available for expenditure on a new electric car, or a new, unused car with CO2 emissions up to the threshold. For expenditure incurred before 1/6 April 2013 the threshold is not more than 110gm per km driven. From 1/6 April 2013 (subject to legislation) the threshold was reduced to not more than 95g per km driven Follow the link below for more information on capital allowances on cars.

and from

http://www.hmrc.gov.uk/capital-allowances/plant.ht...

If you buy a new, unused car you can claim up to 100% allowance in the accounting period when it was bought, the balance (which may be nil) goes into the main pool in the next year. For detailed guidance, see the guide First-year allowances: the basics
If you buy a second hand car the expenditure goes into the main rate pool.

DSLiverpool

Original Poster:

14,764 posts

203 months

Monday 13th October 2014
quotequote all
My accountant thinks very low demo miles could be included or pre reg but the links posted don't agree. Will drop HMRC a line I think

DSLiverpool

Original Poster:

14,764 posts

203 months

Monday 13th October 2014
quotequote all
Had this emailed.

In addition to this, I understand that you also had a query regarding a new company car and whether it would qualify for 100% First Year Allowances if it was an ex-demonstration model. I have had a look into this for you and can confirm that the car should still qualify for the allowance. HMRC extend the definition of “unused and not second hand” to include a vehicle which “has been driven a limited number of miles for the purposes of testing, delivery, test driven by a potential purchaser, or used as a demonstration car”. Therefore, provided that the company is the first owner of the car, the vehicle should still qualify for 100% First Year Allowances in the year of purchase

Eric Mc

122,055 posts

266 months

Monday 13th October 2014
quotequote all
DSLiverpool said:
Had this emailed.

Therefore, provided that the company is the first owner of the car, the vehicle should still qualify for 100% First Year Allowances in the year of purchase
Will your business be the first owner?

DSLiverpool

Original Poster:

14,764 posts

203 months

Monday 13th October 2014
quotequote all
In some dealerships yes (out on trade plates) but most dealerships pre reg them - I will have to ensure that the ones we get have not been pre reg - I understand that.

Just out of interest what difference does this 100% first year allowance make – what does it mean? If I got a “used” one that did not qualify for 100% first year allowance how do I (my company) lose out?

Edited by DSLiverpool on Monday 13th October 14:20

Alpinestars

13,954 posts

245 months

Monday 13th October 2014
quotequote all
The law requires the following;

it is expenditure on a car which is first registered on or after 17th April 2002 and which is unused and not second-hand,

HMRC manuals extend the meaning of unused and not second-hand as set out above by another poster. So in theory a demonstrator that is registered by the dealer should still qualify for FYAs. VAT law is helpful in that a new car for VAT purposes includes a pre registered demonstrator.

If you get FYAs you will be able to deduct the price of the car against your profits in the year you buy it. If you cannot/don't claim FYAs, you'll get a deduction of 18% (assuming low emission) of the cost of the car in year 1, 18% of the remaining cost in year 2, etc etc. Not getting FYAs therefore delays the time over which tax relief is obtained, and whether you want FYAs depends on the profitability of the business.


DSLiverpool

Original Poster:

14,764 posts

203 months

Monday 13th October 2014
quotequote all
Alpinestars said:
The law requires the following;

it is expenditure on a car which is first registered on or after 17th April 2002 and which is unused and not second-hand,

HMRC manuals extend the meaning of unused and not second-hand as set out above by another poster. So in theory a demonstrator that is registered by the dealer should still qualify for FYAs. VAT law is helpful in that a new car for VAT purposes includes a pre registered demonstrator.

If you get FYAs you will be able to deduct the price of the car against your profits in the year you buy it. If you cannot/don't claim FYAs, you'll get a deduction of 18% (assuming low emission) of the cost of the car in year 1, 18% of the remaining cost in year 2, etc etc. Not getting FYAs therefore delays the time over which tax relief is obtained, and whether you want FYAs depends on the profitability of the business.
Great reply and exactly what was explained to me - ie buying on contract hire means you cannot get the full relief in year 1 - just the 18%, to buy on lease purchase to get the FYA you need a minimum 10% deposit but the payments are much higher however as mentioned you get an immediate £6k ish write down if on 20% rate.

Oddly 2 company owners who have these on contract hire were not aware of this way of purchase and just contract hired the car - as I would have done had I not been curious

Alpinestars

13,954 posts

245 months

Monday 13th October 2014
quotequote all
DSLiverpool said:
Great reply and exactly what was explained to me - ie buying on contract hire means you cannot get the full relief in year 1 - just the 18%, to buy on lease purchase to get the FYA you need a minimum 10% deposit but the payments are much higher however as mentioned you get an immediate £6k ish write down if on 20% rate.

Oddly 2 company owners who have these on contract hire were not aware of this way of purchase and just contract hired the car - as I would have done had I not been curious
Not sure I understand this. It's been a while since I've looked at capital allowances, but broadly finance leased or HP assets are eligible for capital allowances. Whether that's at 100, 18 or 8% depends on the car's emmisions. Contract hire or operating leased assets are not eligible for capital allowances. Instead you'll be able to deduct the cost of the monthly payments (subject to some restrictions depending on the car).