Tax liability: cars with low CO2
Discussion
PH's may recall a scheme from HMRC allowing 100% capital allowances if you buy a new company car with CO2 emmissions under 120mg? We bought an Audi A2 diesel TDi from the list (which included Ford Fusion, Fiesta, Pug 206 and some Astras)
Two years on and I am thinking of selling the car.
I think there may be a tax liability on sale, because they have in effect given me the full £13,000 against capital allowances in my 2004/5 year when in fact they would normally give me an apportioned allowance over a longer period . Two years or so later the car is worth about £9,000.
Any idea how much I would pay?
I am thinking about buying the car from the company and then charging the 10,000 company miles we do a year back to them as it costs so little to run (65mpg+) and the BiK compamy car tax and NI we pay the savings and 35p a mile would easily offset the runningcosts, especially if I give it a spanking ervice before I buy it (service intervals are adjustable and at about 24,000 miles) and it has a warranty.
The sticking point may be this residual tax for the company that may be liable on sale.
When the proceeds on disposal of an asset exceed the Tax Written Down Value of that asset, the business will incurr a Balancing Charge equal to the "surplus" on disposal.
If the Tax Written Down Value is Nil and the proceeds on disposal is £9,000, then there will be a Balancing Charge of £9,000. If there has been any Private Use Adjustment on the Capital Allowances originally claimed on the asset, then the Balancing Charge will also have the Private Use Adjustment applied.
If the final figure remains at £9,000, you will pay tax on the £9,000 at your highest rate of Income Tax (if an individual) or your highest rate of Corporation Tax (if a company). Obviously, the actual tyax paid will be subject to other claims and reliefs the business might be in a position to claim, including Capital ASllowances on a replacement vehicle and/or the utilisation of available busines losses etc.
If the Tax Written Down Value is Nil and the proceeds on disposal is £9,000, then there will be a Balancing Charge of £9,000. If there has been any Private Use Adjustment on the Capital Allowances originally claimed on the asset, then the Balancing Charge will also have the Private Use Adjustment applied.
If the final figure remains at £9,000, you will pay tax on the £9,000 at your highest rate of Income Tax (if an individual) or your highest rate of Corporation Tax (if a company). Obviously, the actual tyax paid will be subject to other claims and reliefs the business might be in a position to claim, including Capital ASllowances on a replacement vehicle and/or the utilisation of available busines losses etc.
Eric Mc said:
When the proceeds on disposal of an asset exceed the Tax Written Down Value of that asset, the business will incurr a Balancing Charge equal to the "surplus" on disposal.
If the Tax Written Down Value is Nil and the proceeds on disposal is £9,000, then there will be a Balancing Charge of £9,000. If there has been any Private Use Adjustment on the Capital Allowances originally claimed on the asset, then the Balancing Charge will also have the Private Use Adjustment applied.
If the final figure remains at £9,000, you will pay tax on the £9,000 at your highest rate of Income Tax (if an individual) or your highest rate of Corporation Tax (if a company). Obviously, the actual tyax paid will be subject to other claims and reliefs the business might be in a position to claim, including Capital ASllowances on a replacement vehicle and/or the utilisation of available busines losses etc.
If the Tax Written Down Value is Nil and the proceeds on disposal is £9,000, then there will be a Balancing Charge of £9,000. If there has been any Private Use Adjustment on the Capital Allowances originally claimed on the asset, then the Balancing Charge will also have the Private Use Adjustment applied.
If the final figure remains at £9,000, you will pay tax on the £9,000 at your highest rate of Income Tax (if an individual) or your highest rate of Corporation Tax (if a company). Obviously, the actual tyax paid will be subject to other claims and reliefs the business might be in a position to claim, including Capital ASllowances on a replacement vehicle and/or the utilisation of available busines losses etc.
Do they not reduce it for the fact that we would have got some capital allowances anyway over the past 2 years? Corp Tax at 20% on £9000 makes it less attractive as I own the company, so it would cost us £1800 in CT, and I do hate handing money to HMRC.
Eric Mc said:
You get Capital Alloanaces for the years in which you use the asset.However, in the final year of ownership there is no point in making a claim as whatever was claimed in that year would be clawed back when the Net Book Value was offset againts the disposal proceeds.
Thanks Eric. Thank God I am not an accountant, I would be eternally frustrated by the complexity of the HMRC rules and regulations. It is based enough having monthly PAYE, a quarterly VAT return and annual PAYE returns to do.In a previous life at the age of 16 I started down the accountancy route but failed my first set of exams and gave up. I am so pleased .
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