Self Employed Existing Car

edited 30 November -1 at 1:00AM in Cutting Tax
8 replies 956 views
chaz98765chaz98765 Forumite
1 Post
edited 30 November -1 at 1:00AM in Cutting Tax
Hi, I think I understand how you account for car expenses in a SA.

What I don't understand is how you account for an existing car in a capital allowance calulation. Can you use capital allowances as well as car expenses or only one? Do you have to give the car a valuation when started using in your self employment and work out the allowances accordingly.

e.g maybe car bought for £3000 in 2007

Self employment commenced in 2009

car value £2000 in 2009

yr1 allowance £400 (assuming 100% business use)

Any guidance will be greatfully received.

Thanks

Replies

  • If you are using the mileage method for car expenses, then yu can't claim capital allowances.
    If you are including actual car expenses, then yu can claim capital allowances. Where you already owned the car at the start of trading, your base cost for capital allowances is the value at the start of trading. This also applies for any other plant and machinery which yu may already have owned at the start of trading.
    If you are claiming 100% business use, be absolutely certain that this is really the case. The lack of add-backs for private use of a vehicle is one of the risk factors which HMRC uses when deciding which returns to investigate.
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  • What do u mean by add-backs? I have claimed for the whole exspense of the car, which is £1500, because I can't work without a car. Then a percentage of the costs (petrol, insurance, maintainance,etc.) as I do use it for shopping and occasional trips out, is this wrong? Why are there no proper guides for self employed people that tell u exactly what u can claim?
  • FatAndyFatAndy Forumite
    7.5K Posts
    harmony13 wrote: »
    What do u mean by add-backs? I have claimed for the whole exspense of the car, which is £1500, because I can't work without a car. Then a percentage of the costs (petrol, insurance, maintainance,etc.) as I do use it for shopping and occasional trips out, is this wrong? Why are there no proper guides for self employed people that tell u exactly what u can claim?

    Basically you add togther all your expenses but then disallow a percentage for private use. e.g. If your petrol, insurance, maintenance etc adds up to £2000 and you consider that 75% of the use is business and 25% is private then you would claim 75%x£2000 = £1500 as a business expense. This appears to be what you're already doing.

    The question is what percentage to claim as business use? When I worked in practice I could pretty much guarantee that if I asked a client then it would be 90% business use and 10% private! The percentage you use is basically up to you but you may be asked to justify it so be realistic. Your private use will depend on how far from home the shops are, how far away your relatives live, where you go for days out and so on. There isn't therefore a standard rule for this as everyone's circumstances are different.

    Keep a mileage log and record business trips and private mileage in seperate columns to get an idea of a reasonable percentage to claim. Then if HMRC do question your claim you've got something to back it up.
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  • mikey72mikey72 Forumite
    14.7K Posts
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    You can't include the full cost of the car in the first year can you?
  • zygurat789zygurat789 Forumite
    4.3K Posts
    Part of the Furniture Combo Breaker
    ✭✭✭✭
    mikey72 wrote: »
    You can't include the full cost of the car in the first year can you?

    Yes in special circumstances if HMRC agree, such as a F1 car.
    The only thing that is constant is change.
  • mikey72mikey72 Forumite
    14.7K Posts
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    mikey72 wrote: »
    You can't include the full cost of the car in the first year can you?


    You can't include the full cost of the car in the example given above in the first year can you?
  • zygurat789zygurat789 Forumite
    4.3K Posts
    Part of the Furniture Combo Breaker
    ✭✭✭✭
    mikey72 wrote: »
    You can't include the full cost of the car in the example given above in the first year can you?

    Yes, I have seen it done.
    The only thing that is constant is change.
  • TM1976TM1976 Forumite
    717 Posts
    Mikey72, just to clarify here zygurat789 is referring to the F1 car not the example on this thread. I'm guessing your business isn't an F1 team..
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