Capital allowances on leased cars

Capital allowances on leased cars

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Can someone point me to the tax guidance on limited companies buying cars on a lease, where they do not own the car at the end?  Is it a case of a proportion of lease payments being allowed rather than capital allowances and does this depend on emissions at all?

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By Richard Willis
16th May 2011 13:02

Not Capital
If the company doesn't own the asset (car) at the end it will be an operating lease. In the normal course this would simply be a case of the lease payments, net of VAT, being charged as a charge against profits. However for cars with a list price of over £12,500 the charge to P&L is restricted to 50% of the pro rata excess over £12,000.

SO, if the list price (including any extras, such as tow bars, etc.) is £18,250 (i.e. 12,500 x 1.5) and the lease cost for the year is £3,000 you can charge 2/3 x £3,000 in full PLUS 50% of the remaining 1/3, i.e. £2000 + £500.

HOWEVER this is ONLY for the cost of leasing the vehicle so relief on any maintenance charge included is fully chargeable. Vans with NO private use are recoverable in full but I am not sure how they are calculated if there IS private use. No doubt someone will fill this in.

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By Chris Wise
16th May 2011 15:13

Old rules

Rchard's reply only covers pre 2009, have a look here for the new rules

http://www.hmrc.gov.uk/pbr2008/pbrn17.pdf

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By Richard Willis
17th May 2011 18:38

Sorry

I thought I remebered someone giving the same answer quite recently.  40 lashes for me!!

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