Tax relief on Hire purchase car allowed?

wanderer

[FONT=&quot]I plan to buy a car partly for business use and partly for domestic use. The car will be bought on hire purchase agreement, with a lump sum payable up front, a monthly payment for 4 years and then a final lump sum payment to acquire the vehicle at the end of 4 years. Can I claim tax relief on this car purchase? What are the tax implications when I purchase the car at the end of 4 yrs?[/FONT]

antrobus

wanderer wrote: »

[FONT=&quot].. Can I claim tax relief on this car purchase?[/FONT][FONT=&quot][FONT=&quot] [/FONT]What are the tax implications when I purchase the car at the end of 4 yrs?[/FONT]

For accounting and tax purposes, buying a car with HP is treated in exactly the same way as buying a car with a bank loan. The fact that the car legally belongs to the HP company for the duration of the agreement is simply ignored.

zygurat789

wanderer wrote: »

[FONT=&quot]I plan to buy a car partly for business use and partly for domestic use. The car will be bought on hire purchase agreement, with a lump sum payable up front, a monthly payment for 4 years and then a final lump sum payment to acquire the vehicle at the end of 4 years. Can I claim tax relief on this car purchase? What are the tax implications when I purchase the car at the end of 4 yrs?[/FONT]

This sounds like it may either be a lease purchase agreement or a lease rather than a hire purchase agreement. You need to read the agreement to see when ownership passes. The accounting treatments are totally different.

With a bank loan the interest may be charged on a daily basis in which case most of the interest charge to P & L is in the first years. With a hire purchase, lease purchaes or a fixed repayment bank loan the total interest is charged on a pro rata basis according to the number of payments.
With a leasing agreement the car 's ownership does not pass on the cessation of the agreement though there may be another, separate agreement to sell the car for £1, in which case all the payment is charged to P & l.
Where only interest is charged to P & L capitl allowances can be cklaimed on the car. Any private use is subject to an add-back in the usual way