Tax Return Help

hayleynewbie

Hello

Hoping I can post this here.

My husband is filing his first tax return and we are not sure how to account for the following in terms of which value to put in which field in the Capital Allowance section. He is filing on a cash basis. He bought Car A for £2500, then we traded it in when I upgraded my own car and he received £3965.02. I then gave him my old car (Car as a gift and the current market value for this is £4650.

My husband has tried phoning HMRC twice but they have been unable to tell him how to account for this on the form. Please help.

Savvy_Sue

You'd probably do better on the Cutting Tax board, but it might make a difference if we knew what status your DH has.

Is he self-employed as a sole trader?
Or a limited company?

silvercar

hayleynewbie wrote: »

Hello

Hoping I can post this here.

My husband is filing his first tax return and we are not sure how to account for the following in terms of which value to put in which field in the Capital Allowance section. He is filing on a cash basis. He bought Car A for £2500, then we traded it in when I upgraded my own car and he received £3965.02. I then gave him my old car (Car as a gift and the current market value for this is £4650.

My husband has tried phoning HMRC twice but they have been unable to tell him how to account for this on the form. Please help.

Is he a dealer, buying/ trading cars for a living?

Gifts between spouses are exempt from CGT. A car is a depreciating asset. Why would this be relevant to his tax return?

hayleynewbie

He is self-employed as a sole trader.

No he is not a car dealer. The capital allowances and balances charges sections states:

You can claim capital allowances for the purchase and improvements to equipment and machinery such as vehicles, tools, computers, business furniture used in your business.

Which is why we need to account for the cars.

Suarez

What percentage is the car used business/personal?

Have you compared/considered claiming mileage?

winspiration

There is information on HMRC's website about claiming for cars: https://www.gov.uk/capital-allowances/business-cars

Which car is he looking to account for, the original £2500 one, or the later trade in / gift? Not sure how he could claim a gift as a capital allowance to set against his other expenses. If he claimed the original expense, I think he'd also have to declare the trade in which would more than wipe out the original expense, so rather pointless.

Is the car a major part of his business or is it for personal use as well? That would have to be taken into account when deciding whether to claim it as a capital allowance.

It might be a lot more straightforward to just claim mileage allowances instead of a capital allowance:
https://www.gov.uk/simpler-income-tax-simplified-expenses/vehicles-

bairn7

What are the dates for the various transactions?


The rate of capital allowances for cars depends on the c02 emissions. However, you can't claim standard capital allowances ("writing down allowances") in the year of sale.


So if your husband disposed of the first car in the first year of trade, it shouldn't be included at all and no capital allowances are due. There is no CGT on cars generally so no tax to pay on sale.


For the second car, HMRC's guidance states that you bring in the cost of the car at the date of the gift and treat it as the purchase price (https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23040). Capital allowances will be available at either 18% or 8% depending on the Co2 emissions, with an appropriate proportionate reduction to the figure arrived at for personal use.


As advised in another post, simplified mileage expenses may be the easier way to go here. https://www.gov.uk/simpler-income-tax-simplified-expenses/vehicles-