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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am sole trader and UK VAT registered. I keep my own

Customer Question

Hi, I am sole trader and UK VAT registered. I keep my own books and operate a the simplified tax system - cash accounting. Help needed with book-keeping and tax regarding my car. I bought a new car june 2014 and applied 18% annual depreciation as its under 130 gm emissions. I plan to replace the car and have ordered one for delivery 6th April on a 3 year contract hire deal. My question is have I got the following correct:
Old car after applying depreciation stands around £14,000 but dealers are offering £10,000 which is a loss so I can show this as a loss this tax year if the dealer takes it on the 5th April or earlier?
New car, mileage records indicate 65% business use so I charge 65% of the monthly rental and initial payment to the business?
New car what about VAT, I seem to recall thats 50% of the VAT or is it 65% like the rental?
The dealer is putting me under pressure to take the new car end of March. If i took it week 51 of the current tax year do I adjust the annual depreciation by 51/52?
Thanks
Chris
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Let me take a look at this and I'll get back to you with my answer in a bit.
Expert:  TonyTax replied 1 year ago.
I'm assuming that you have been in business for several years. Take a look here for information on capital allowances. Any asset which has an element of private use is kept it its own pool and not mixed in the general pool of assets. If you sell your existing car for less than the capital allowances written down value, then you can claim a balancing allowance equal to the difference less a deduction to reflect private use. You take the balancing allowance in the tax year during which the accounting period in which you sell the car ends. You would normally include the whole rental in your profit and loss account and add back the private use element in the adjusted profit calculation. You can reclaim 50% of the VAT as you will read here. You wouldn't depreciate a contract hire car as you don't own it. I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 1 year ago.
Hi.I'm just following up to find out if my answer helped or if you have any further questions.