FAO ERIC MC...business expenses
Discussion
Hi all & Eric sir,
Please don't anyone flame me for not scouring for older answers - I just need an up-to-date and hopefully definitive answer.
Recently self-employed, registered as such with HMRC. Not a company therefore.
Have just bought a new vehicle (£34K) - the use of which can reasonably be said to be for 100% business use.
Question - how exactly does claiming this under Self Assessment as an expense work?
I've heard everything from 25% to 35% per year. Certainly not all in one go I'm told (wishful thinking).
In that case - do I simply sling the percentage figure in the 'business expenses' section of the Self Assessment form? Is it really as simple as that?
Any light shed would be gratefully received.
Arif
Please don't anyone flame me for not scouring for older answers - I just need an up-to-date and hopefully definitive answer.
Recently self-employed, registered as such with HMRC. Not a company therefore.
Have just bought a new vehicle (£34K) - the use of which can reasonably be said to be for 100% business use.
Question - how exactly does claiming this under Self Assessment as an expense work?
I've heard everything from 25% to 35% per year. Certainly not all in one go I'm told (wishful thinking).
In that case - do I simply sling the percentage figure in the 'business expenses' section of the Self Assessment form? Is it really as simple as that?
Any light shed would be gratefully received.
Arif
Is it a Motor Car or a Commercial Vehicle (van, truck, digger, lorry, bus, black cab etc)?
On what date did you buy it?
Do you have access to a non-business alternative vehicle or means of transport?
Was the purchase of the vehicle financed by a bank loan, a HP or some form of lease agreement?
If a lease, was it an operating lease or a finance lease?
On what date did you buy it?
Do you have access to a non-business alternative vehicle or means of transport?
Was the purchase of the vehicle financed by a bank loan, a HP or some form of lease agreement?
If a lease, was it an operating lease or a finance lease?
Edited by Eric Mc on Friday 5th September 08:13
Hi Eric,
Thanks for the reply so far...
1) Motor Car (Toyota Landcruiser)
2) Bought on 8 Aug 08
3) Yes - have a second vehicle for 'normal'/non-business use - Honda Jazz
4) Financing straight-out loan from Toyota Finance (£680/month, for 5 years or so - plan to pay it off early, though))
5) n/a
Arif
Thanks for the reply so far...
1) Motor Car (Toyota Landcruiser)
2) Bought on 8 Aug 08
3) Yes - have a second vehicle for 'normal'/non-business use - Honda Jazz
4) Financing straight-out loan from Toyota Finance (£680/month, for 5 years or so - plan to pay it off early, though))
5) n/a
Arif
OK,
On the assumption that it ISN'T a car with CO2 emissions below 110g/km (which attract 100% Capital Allowances in the first year), then, being a normal car there are big restrictions on what you can claim.
Cost £34,000
Capital Allowance - 20% per annum on a reducing balance
However, being an "Expensive Car" (i.e. costing over £12,000) the maximum amount that can be claimed is £3,000. On the assumption that you won't be keeping the car over 8 years, you will only ever be able to claim £3,000 maximum each year the car is used in the business
Having said that, the rules are changing very significantly on 6 April 2009 so the above will not apply after this year. The new allowances will be based on (guess what) - CO2 emmissions - right across the board. However, the details have not yet been set out. Things should be clearer after the Autumn statement from the Chancellor (or, knowing Darling, even more confusing).
You should be able to offset the loan interest arising from the vehicle loan as a cost against business profits too.
On the assumption that it ISN'T a car with CO2 emissions below 110g/km (which attract 100% Capital Allowances in the first year), then, being a normal car there are big restrictions on what you can claim.
Cost £34,000
Capital Allowance - 20% per annum on a reducing balance
However, being an "Expensive Car" (i.e. costing over £12,000) the maximum amount that can be claimed is £3,000. On the assumption that you won't be keeping the car over 8 years, you will only ever be able to claim £3,000 maximum each year the car is used in the business
Having said that, the rules are changing very significantly on 6 April 2009 so the above will not apply after this year. The new allowances will be based on (guess what) - CO2 emmissions - right across the board. However, the details have not yet been set out. Things should be clearer after the Autumn statement from the Chancellor (or, knowing Darling, even more confusing).
You should be able to offset the loan interest arising from the vehicle loan as a cost against business profits too.
Edited by Eric Mc on Friday 5th September 08:53
Eric Mc said:
On the assumption that you won't be keeping the car over 8 years, you will only ever be able to claim £3,000 maximum each year the car is used in the business
1) CO2 emissions correctly surmised.2) Definitely planning to keep it for at least 8 years - normally buy new cars and keep for 'decades', and not 'years'. Does that somehow affect the £3000 limit?
3) Assuming no way around the £3000 limit, and keeping for at least a decade or more - guess will simply recoup much of the cost on that 'attrition' basis?
4) Have heard most other costs don't have to be sliced up (with 100% business use) - but can safely be slung straight in the 'Expenses' column - e.g. insurance, fuel, tax, servicing, sundries. Sound advice?
5) Criterion for determining 'business use' that am using is, "What is the sole and principal purpose behind entering the vehicle and beginning the journey?"
Arif110 said:
Eric Mc said:
On the assumption that you won't be keeping the car over 8 years, you will only ever be able to claim £3,000 maximum each year the car is used in the business
1) CO2 emissions correctly surmised.2) Definitely planning to keep it for at least 8 years - normally buy new cars and keep for 'decades', and not 'years'. Does that somehow affect the £3000 limit?
3) Assuming no way around the £3000 limit, and keeping for at least a decade or more - guess will simply recoup much of the cost on that 'attrition' basis?
4) Have heard most other costs don't have to be sliced up (with 100% business use) - but can safely be slung straight in the 'Expenses' column - e.g. insurance, fuel, tax, servicing, sundries. Sound advice?
5) Criterion for determining 'business use' that am using is, "What is the sole and principal purpose behind entering the vehicle and beginning the journey?"
I also have a feeling that the £3,000 limit on Expensive Cars will be changed when the new rules are announced.
Edited by Eric Mc on Friday 5th September 11:21
Excellent - thank you for your time over this, Eric.
I'm aware of the liberty that's effectively taken when people like me post up questions like that for you to give your professional opinion on - however do be assured that I will be hiring a local accountancy firm to make my business complete and suitably resourced, going forward.
Arif
I'm aware of the liberty that's effectively taken when people like me post up questions like that for you to give your professional opinion on - however do be assured that I will be hiring a local accountancy firm to make my business complete and suitably resourced, going forward.
Arif
Can I just get this straight, if I was to buy a 2nd car for personal use, and were to use my current car (bmw 320d) solely for business use (travelling to different client sites on daily basis) could I claim 100% of the capital allowance and all associated costs? Its not brand new (53) but is the allowance based on the cost when new?
P.S. I'm structured as a ltd co.
P.S. I'm structured as a ltd co.
The rules for ltd co's and sole traders are quite different. What you're suggesting is possible, but you would have to be VERY careful due to benefit in kind rules etc - the car would have to be a pool car and stay on company premises overnight; could you also prove that you NEVER had any personal use at all?
When a business has a "motor car" in its balance sheet and it is used for business and private purposes, the private use element must always be considered for tax purposes. Sole traders and partnerships have to be aware of the impact the private useage will have on -
vehicle running costs
capital allowance claims
finance costs associated with the vehicle
Input VAT claims on the vehicle running expenses
Benefit in Kind charges on the employees (but not the proprietors)
If a limited company, then Benefit in Kind matters will affect the directors who are almost always the proprietors (i.e. shareholders) of the company too.
vehicle running costs
capital allowance claims
finance costs associated with the vehicle
Input VAT claims on the vehicle running expenses
Benefit in Kind charges on the employees (but not the proprietors)
If a limited company, then Benefit in Kind matters will affect the directors who are almost always the proprietors (i.e. shareholders) of the company too.
smartie said:
The rules for ltd co's and sole traders are quite different. What you're suggesting is possible, but you would have to be VERY careful due to benefit in kind rules etc - the car would have to be a pool car and stay on company premises overnight; could you also prove that you NEVER had any personal use at all?
I'm a 1 man band so office address is home address. I keep records of all mileages undertaken which could be proven pretty accurately with google maps etc and using MOT certs would that be sufficient for HMRC?Alternatively, I don't mind just declaring a 10% allowance or something but still having the benefit of claiming some capital allowance. At present my accountant reckons the 40p/25p allowance is the best way to do things but I think its probably because its just easier for him? Though i shouldn't assume.
Seany88 said:
smartie said:
The rules for ltd co's and sole traders are quite different. What you're suggesting is possible, but you would have to be VERY careful due to benefit in kind rules etc - the car would have to be a pool car and stay on company premises overnight; could you also prove that you NEVER had any personal use at all?
I'm a 1 man band so office address is home address. I keep records of all mileages undertaken which could be proven pretty accurately with google maps etc and using MOT certs would that be sufficient for HMRC?Alternatively, I don't mind just declaring a 10% allowance or something but still having the benefit of claiming some capital allowance. At present my accountant reckons the 40p/25p allowance is the best way to do things but I think its probably because its just easier for him? Though i shouldn't assume.
Gassing Station | Business | Top of Page | What's New | My Stuff