Balancing allowance on expensive motor car

R.Tempest

I wonder if someone could tell me whether I've got this bit right?In June last year I bought a car for £14,000 for use in my personal business. In December I stopped using the car in that business (but didn't sell it, I just kept it myself to use, but not for the business). At that time it had a market value of £11,600. The car was used 75% on business, 25% personal.Is the following right for its capital allowances? I open a pool specifically for it, since it cost more than £12000; but the cost shown in the pool is £14000. Then I close the pool with its disposal proceeds (but it hasn't got any so I'll put its market value in) of £11600. There are no writing down allowances, but there will be a balancing allowance of £2400 of which I will be allowed 75%, i.e. £1800. Is that right, please?

Debt_Free_Chick

Is the car a qualifying low-emission car?

R.Tempest

No, it's not a low emmission car.

Debt_Free_Chick

Your calculation looks right to me - no WDA, deduct the value of the car transferred to you, take 75% of the answer and claim this as a balancing allowance.

The WDA (had there been one) would have been restricted to £3,000 as you can only base the cap allowance on a maximum value of £12,000. However, I understand that it's WDA which is restricted .... not the value of the car for the purpose of calculating the value of the pool.

R.Tempest

Many thanks for your confirmation re balancing charge. I've been thinking about this balancing charge business, and something strikes me. Suppose (hypothetically) someone with their own business bought a low emission car (gaining 100% First Year Allowance) a week before the tax year end, and very deliberately used it solely for business for that week. Then (am I correct?) it would gain the whole allowance since it is a first year allowance and not time apportioned rather than a writing down allowance which would be. So on a £10000 car this would be worth at that point £4000 cash effect to that person. Now that would be no help if a balancing charge wiped that out the next year. But couldn't the car the next year and thereafter be used very little for business - say just 10%. It wouldn't get any allowances, but then, it's had all those already; and a balancing charge wouldn't crystallise. Eventually, no doubt, a balancing charge would arise but in some years time the car won't be worth much. It surely is up to the proprietor of the business to decide what car he wants to use on business matters from time to time, and claim allowances accordingly? Is there some flaw in all that?