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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Looking advice please on use car purchase UK

Resolved Question:

Looking advice please on use car purchase UK Vat Registered Sole Trader business. I've purchased a van through the business but as that is a commercial vehicle and 100% business use I found that easy to account is the first time I'm looking to buy a car business and part personal use.
Cost of vehicle is £35000, after £15k deposit leave a £20000 loan which I'm going to get over a 5 or 6 yr term, example Ive calculated over 6 years.
Interest on the loan over the term is £4057 (APR 6.1%)
so £676.17 Interest Repayment per 12month business year.
Regards ***** ***** am I correct in thinking this would go into a Special Rate Pool as the CO2 emissions are 294 g/km. So the Written Doen value per year would 8%?
I have van which is 100% business use and the car will mainly be used haul client, producers and supplier meetings (possibly additional use in winter of some goods if weather bad, got stuck too many time last winter so one reason I need to look at a 4x4) and of course some family use though my wife also has a her own car which we use mainly as a family car. Business use is going to be around 70% new vehicle.
So after a long of preamble (sorry!) my question is this, on an opening balance of 35k, 8% written down would be £2800 and 70% use would make the actual Capital Allowance Claim £1960 and closing balance of £33.040.
As an expense so i deduct this £1960 Capital Allowance off profits? Is this yearly calculated written down cost only applicable over the length of the loan term also ie 6 years or until the closing balance is Zero or I sell the vehicle?
Do I also deduct 70% of the yearly interest payment which would be £473.31 years.
Do I still then also deduct 70% of the full running costs ie fuel, tyres, mot, servicing etc as usual.
Looking forward to hearing back form those who know moew about this area of business capital allowances.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
.

Leave this with me and I'll get back to you once I've been through all your points.
Expert:  TonyTax replied 2 years ago.
I'm back.

Look here on VAT and cars.

Take a look here on cars and capital allowances.

As your car has CO2 emissions over 130g/km it will go into a single special rate pool due to the private use where you will get an 8% annual writing down allowance on a reducing balance with an adjustment use. Your initial writing down allowance will be £1,960 (£35,000 x 8% x 70%). The written down value would be £32,200 (£35,000 - £2,800). The second year WDA would be £1,803 (£32,200 x 8% x 70%). The written down value would then be £29,624.

The capital allowance is a deduction from your business profit. It does not necessarily tie in with the six year loan term. It's a simple reducing balance basis until you sell it or withdraw it from the business or it is written off at which time there will either be a balancing allowance or a balancing charge.

You can also claim as an expense in your accounts 70% of the finance costs and 70% of the annual running costs. Some people put all the running costs through their profit and loss account and then add back the private use element in their adjusted profit computation where the capital allowances are also taken account of. Others simply put through the business use element through the profit and loss account so there is no need add back.

I hope this helps but let me know if you have any further questions.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Ah that's great Tony.

I see in my calculations I made the mistake of only writing down the (8% x 70%) value not the full 8% value.

I know understand that its just the actual capital allowance claim that I reduce by the 70% business use and the 8% written down value on opening and closing occurs no matter what.

Thanks this you have been very helpful

Expert:  TonyTax replied 2 years ago.
It has to be that way as otherwise you would not be suffering tax wise private use.
TonyTax and other Tax Specialists are ready to help you
Expert:  TonyTax replied 2 years ago.
.

You appear to have paid twice. If that was not your intention contact customer service at just answer.
Customer: replied 2 years ago.

Tony

I merely clicked the button that yes I was happy to pay answer then two debits were taken from my account. I contacted customers services around 5 days ago but have heard no response. Will try again now as have had no response. Many thanks Gavin

Expert:  TonyTax replied 2 years ago.
I will send a message to them .
Customer: replied 2 years ago.

That's great thanks Tony. I've just emailed them once again. Many thanks

Gavin

Expert:  TonyTax replied 2 years ago.
OK. I'll let you know if I hear anything.

There's no need to respond to this post. If you do, I will have to respond myself because if I don't do so within 15 minutes I cannot answer other questions.