Capital allowance on car in buy to let business

[hodgre]

Thinking of claiming capital allowance on car that I use in property development/buy to let as sole trader (approx 50:50 split private/business) Seems to be allowable under HMRC internal manual guidance and other tax portal guidance. However my accountant tells me I cannot do it and I have been unable to establish a precise reason for this other than car expensive which may attract the revenue’s interest. Irritating as have discussed this before with them and no concerns expressed. Anyone have any thoughts on this or have actually used capital allowance in this manner?

[MrOrange]

I might be able to shed some light on this as I have gone through the same recently:

1. Capital allowance on most cars (anything 50g/km) today are just 6% which is crap. If it’s zero Co2 you can claim 100% WDA. 1-50 g/kms the capital allowance is 18%.
2. Company cars attract BIK (tax), which is prohibitive. A Cayman comes in at 37% - that is you will pay the tax on 37% of the full RRP every year you run the car. (Edit: I’ve just re-read and you’re a sole trader so this doesn’t apply, but a percentage of running costs will be deducted to cover private miles but not sure the tax rules on a sole trader in BTL, I thought the rules only work if property development was run through a proper company)

So, whilst it’s technically feasible, it will almost definitely cost you more.

Background: I run an LLP and co cars are no longer worth us running unless zero tailpipe emissions. The changes to the allowances have been murdered in just a few years - I got 100% first year WDA on my i8 (49 g/kms) in 2016. Bought today it would be just 18%.

Note: I am not an accountant so the above may be wrong, nor is it advice.

Edited by MrOrange on Thursday 10th February 17:32

Edited by MrOrange on Thursday 10th February 17:36

[Alpinestars]

You need to get your accountant to give you his technical reason for his conclusion. Not just, “it’ll attract attention”. You should be able to claim.

[hodgre]

Agree
Soon to be ex accountant.

[Puzzles]

Yes it is possible and you don't have you use a 50/50 split. It does depend on the details though and you've got to check what is most tax efficient. TBH this is a very standard service, we do this stuff all the time.

Edited by Puzzles on Thursday 10th February 23:43

[Eric Mc]

Capital allowances when computing rental profits are much more restricted than they are from a business (trading) activity.

However, you seem to be indicating that -


a) you have rental income in your personal name

b) you have profits from a property development operation (sole trader)

For income tax purposes, it would be normal for the rental profits to be declared under the rental income rules and not as part of a sole tradership activity.

My angle on this would be to claim capital allowances on the vehicle as part of your property developer sole trader activity and not try to process such claims it through your rental income activity.

[hodgre]

Thanks for thoughts
Still no further forward on accountant’s reasoning