Tax breaks for hybrid company cars

[HammyHamster]

The initial message was deleted from this topic on 12 February 2019 at 16:37

[Eric Mc]

If you claim capital allowances on an asset in the year of purchase, you obviously obtain tax relief on that expenditure.

If you subsequently sell that asset, then the proceeds on the sale have to be included as "negative expenditure" in the Capital Allowance computation in the year of disposal.

If you bought an asset and claimed 100% allowances when it was purchased, then 100% of the sale proceeds will be taxed when it is subsequently sold.

As for VAT, if you reclaim VAT on an item when purchased, you MUST declare and pay over VAT when that item is subsequently sold.

If you are normally on the Flat Rate Scheme and therefore normally do not reclaim Input VAT on your costs, you are still allowed to claim Input VAT on capital items costing more than £2,000. However, when that asset is subsequently sold, the sale is outside the Flat Rate Scheme and normal VAT at 20% (not at your Flat Rate percentage - whatever that is) must be calculated on the sale and paid over to HMRC.

[HammyHamster]

Thanks Eric, that's very helpful.

[stneville]

My understanding was that you can't claim the VAT back on a company car if you are on the flat rate scheme regardless if it is over 2k.

[Eric Mc]

That is the normal rule I have to say. My reply was in relation to the general rule for "plant and machinery" type assets.

[SluffMcDuff]

If the car is made available for personal use, which it sounds like it is, you cannot claim back any VAT on the purchase. Only if the car is 100% for business use can VAT be reclaimed.

This would also mean no VAT would be due when you sell it.