Capital allowance on Car on disposal

[sgrimshaw]

Anyone know if this would be acceptable to Inland Revenue.

I acquired a new car in March 2006 with a value of £28,000, at the time I was employed and the car was used primarily for work.

Left employment in February 2007 and started up own business on 1st March 2007

Had a short first financial year to align year end with tax year.

Calculated Capital Allowance on Car for business as:

2006/07 Tax Year

Value at 01/03/07 £21,000 (allowing for significant year 1 deprn)
WDA @ 25% (restricted to £3000, then 1/12th) £ 250
Value to carry forward £20,750

Actual claim was adjusted down to £201 to reflect small personal use.


2007/08 Tax Year

Value at 01/04/07 £20,750
WDA (25% but restricted to £3000) £ 3,000
Value to carry forward £17,750

Again actual claim was reduced to reflect personal use.

Current Tax Year.
Value at 01/04/08 £17,750

Considering disposing of this vehicle and replacing it.

Offers for trade in, market price in classifieds is around the £8,000 mark.

Heres' the question:

If I dispose of vehicle "now", can I claim final allowance of £9,750 - presumeably reduced to reflect any personal use?

I'd be then introducing another newish vehicle for the rest of the year.

Really asking if the revenue would baulk at seeing Capital Allowance claim for a year in the region of £10k for vehicles where it's essentially a sole trader.

Thanks.

Simon

[smartie]

should be fine.

[Eric Mc]

The proceeds on disposal (trade-in received, cash on sale etc) are offset against the tax written down value at the beginning of the tax year. The balance left over will be looked on as a "Balancing Allowance" and is the final capital allowance claim on that particular asset. The only adjustment that needs to be made to the balancing allowance claim is the private use restriction which will be based on the private useage percentage appropriate for that car in that tax year.
The Revenue will accept the claim but you might want to consider providing them with some additional explanation as to how the allowance claim figure has been arrived at.

You can provide the actual computations (I do this as a matter of course) or you could place an explanation in one of the "Additional Information" boxes of the Self Assessment tax return.

[sgrimshaw]

Thanks for the responses.

Just one way I can think of to reduce my tax bill this year.

[CaptainSlow]

Eric Mc said:

The proceeds on disposal (trade-in received, cash on sale etc) are offset against the tax written down value at the beginning of the tax year. The balance left over will be looked on as a "Balancing Allowance" and is the final capital allowance claim on that particular asset. The only adjustment that needs to be made to the balancing allowance claim is the private use restriction which will be based on the private useage percentage appropriate for that car in that tax year.
The Revenue will accept the claim but you might want to consider providing them with some additional explanation as to how the allowance claim figure has been arrived at.

You can provide the actual computations (I do this as a matter of course) or you could place an explanation in one of the "Additional Information" boxes of the Self Assessment tax return.

remember new vehicles are unlikely to be put into single asset pools from 09/10

[Eric Mc]

I'm still working on 07/08 tax regulations at the moment

[smartie]

also likely that vehicles that emit more than 160g Co2 will be reduced to 10%pa; pretty sure there will be no more ballancing allowances on cars too.

[CaptainSlow]

smartie said:

also likely that vehicles that emit more than 160g Co2 will be reduced to 10%pa; pretty sure there will be no more ballancing allowances on cars too.

yup that's the impact of no single asset pools. these are significant changes