Self employed and the new capital allowance rules for vehicle

ivan_the_not-so-terrible

I'm confused (not an uncommon condition for me)

I'm a self employed agricultural contractor and until 18 months ago worked on a single contract where I didn't need a specific vehicle for business use. I used to put down 50% of vehicle use to the business as this reflected pretty much how I used the car we had. I never claimed on the capital cost as I considered the vehicle primarily private.

18 months ago I lost that single contract and now work on several local farms. Because of the change of circumstances, I decided last year to buy a second-hand 4x4 pickup, which is used almost exclusively for business use (save maybe less than 10% when, say my wife can't run the kids to school or whatever). We now have a seperate car for home use unlike before when I used the family car for business use. It's classed as a commercial vehicle, and I had planned to write it off over two years (as it was bought on a two year loan, and after which I reckon it will need replacing). However, now I'm filling my tax return in, I see the rules have changed for vehicles bought after April 6th 2009 (I bought the pickup on the 20th April last year). It' all to do with CO2 emissions, and it looks like I can only use a WDA of 20%? I could call the vehicle an investment allowance, but would then have to write 100% in the first year. As I'm only earning around £5000 once other expenses are taken off, I'd loose out by doing this, as next year I couldn't claim, and my expenses would be less and more tax due. I'm below the tax threshold already this year so would be even further below if I claimed the full value of the vehicle in one year. Also, as I do use the pickup occassionally for private use (<10%) I think this would fall short of the investment allowance rules anyway?

Anyone know the best wy forward, or where to get clear advice without incurring too much cost?

Thanks

Another thought. If I claimed a milage cost of 40p instead of capital and costs, I'd be quids in. However, in the past I've always done a breakdown of motoring costs. Can I change the way I account my motoring expenses now? I've been self employed many years, but this is the first time I've had a specific work commercial vehicle.

ivan_the_not-so-terrible

Obviously everyone else is just as confused as me!

Ivan

Elaine_Wilson

I'm going to answer your questions out of order. First, the alternative method of charging for motor expenses is available if your turnover is below the VAT registration limit. Once you start using either method you must stay with that method until the vehicle is changed. With the new vehicle you have the choice again and can switch if you think it will be better.

On to the recent changes. The provisions apply to cars bought after 5th April 2009. You said you bought a pick-up. Are you sure this is counted as a car?

If it is not a car then it is treated a plant and equipment and you have the annual investment allowance and the usual 20% WDA available.

Assuming it is plant and not a car the 100% is available in the first year. You do not have to claim all of this if you do not wish to. You can reduce the claim to any figure you choose. The balance would be carried forward (probably in a separate pool as you say there is a private proportion) to the next year. In the second year you would be able to claim a maximum of 20% of that brought forward balance.