Car not used during the year

Car not used during the year

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As a sole trader I normally claim 50% of my car running costs as a deduction. Unfortunately my car has been in a garage undergoing repairs for the last 12 months. As there is therefore no business use during the period can I still claim 50% of the insurance, road tax and capital allowances?

I have used a hire car on the few occasions I have needed to travel on business. 50% of these costs are also private and I will make the appropriate adjustment.

Any help appreciated.

Neil

Replies (13)

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By Abacjm
18th Sep 2004 00:03

What costs did you really have?
What is not clear with the question is exactly what costs did you incur with the old Merc?

Presumably, you applied for a SORN (Statutory Off road Notification) declaration in respect of the road tax and as it was garaged for the full year, no insurance or at least reduced to 3rd Party Fire & Theft cover only, as presumably the garage has its own cover for 3rd party property in its care.

Presumably, the garage billed you as the repairs took place or did they send you a huge bill on completion? if the former, I would imagine that you can include the costs, insofar as they are truly repair and not Capital Improvement of the car - o/w you are running the risk of having the whole lot re-classified in the current year as Capital, which by the sound of it, is probably the case, if everything has been renewed.

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By AnonymousUser
15th Sep 2004 22:35

Car costs
What about the costs of repairing the car? Are they still allowable (at the correct proportion)?
I assume the repairs would have been made whether they had been completed in 12 days or 12 months. So am I correct in saying the maintenance is allowable as usual? My point being that if a car had been in the garage for a week, the costs of that would go through the books as usual.

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By User deleted
16th Sep 2004 17:51

Thanks Guys
Thanks for all your help.

Yes my private use adjustment is supported by mileage logs. I now have the car back from the garage and am several thousand pounds worse off.

The car is an old Merc and need quite a lot of work to keep it on the road as I had neglected it for the past couple of years. The garage seemed to have problems getting parts and once one thing was mended something else was wrong. Although I have still probably been ripped off.

It's a pity the car wasn't stolen. I assume as I cannot claim a deduction for insurance as there was no business use during the period any capital allowance balancing charge resulting from the proceeds of an insurance claim would not have been charged to income tax.


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By Helen Crowley
16th Sep 2004 14:20

Further to Mechanics point
Why are you paying road tax on a car that's "off the road"?

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By andymeeson
16th Sep 2004 10:14

Am I the only one to spot a slight risk here?
Two quotes:

(1) "I normally claim 50%"

(2) "...on the few occasions I have needed to travel on business. 50% of these costs are also private"

This would suggest to me that, based on the current year's profile (very few business trips, and even those having a duality of purpose..)the normal claim (50% of all motoring costs) could well be excessive.

It also suggests that this year's claim will be sufficiently, and disproportionately, low to suggest to the Revenue that earlier years might have been excessive and unjustified.

Expect an enquiry.

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By ACDWebb
16th Sep 2004 13:21

Andrew, I would agree
that it does look to be an untested figure and ought to be reviewed for the future with proper mileage logs.

Roll on an enabling letter!

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By AnonymousUser
16th Sep 2004 13:31

12 mths?
what on earth's wrong with your car to warrant a 12mth repair? wouldn't fancy your mechanics eventual bill (write it off I say)

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By AnonymousUser
16th Sep 2004 10:00

Repairs
I see know reason why the repairs, or at least part of them, should be allowed, unless the car is not subsequently used for business purposes. The asset is a business asset, regardless of whether it is in the garage or not. I see no reason why capital allowances should be denied (if they were to be denied for the epriod in question, simply do not claim!)

An interesting point arises - how are costs restricted to business use - by identifying business use and allowing, or by identifying private use and disallowing? The previous respondents have suggested that no business use arose during the period, therefore no deduction. Can it not be argued that as the car was in the garage for the last 12 months there was no private use and that therefore the whole of the costs should be allowable? I would suggest a common-sense approach and deduct the 50% as before.

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By AnonymousUser
17th Sep 2004 10:02

CAs

Just to add one point: if there is any danger of an attack on the basis of no business use, then, instead of claiming 25% WDA and then adding back all of it as disallowable, consider waiving the WDA.

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By AnonymousUser
17th Sep 2004 10:52

To repeat...
Why can't the insurance cost, in full, be claimed? The car is a business asset, that needs to be insured, and so insurance cost is a business expense. Since there has been no private use in the period, I would argue that no restriction is required.

I think it is incorrect to say that just because the asset is laid up in a garage it is not being used for business purposes. What about the situation where a trader has a vehicle that he uses solely for business purposes - he works in office for 3 days a week and visits clients during the other 2 days. Is someone going to suggest that running costs etc should be restricted by 3/5ths (or 5/7ths) just because the car is not actually being used for business purposes on those days? I suppose the concept of availability may be raised, but surely this relates only to emplyment income - I have never heard it discussed in the context of Sch D business.

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By ACDWebb
15th Sep 2004 17:51

You have pretty much answered your own question...
...there is therefore no business use during the period so the answer should be no, or rather the CA's will be due, but restricted to 0% as no business use.

Clearly the hire car cost should be allowable - subject to restriction for private use.

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By John Savage
15th Sep 2004 18:14

Agree with Alan
To obtain a deduction for tax purposes a cost has to be wholly and exclusively for business purposes, with some concessions regarding telephones, motoring and suchlike.

If your car has not been used at all in the business, there is therefore no claim for motoring which can be legitimately made. Of course, you have been hiring a car, so subject to a private/business use adjustment, the cost of that and the fuel consumed can be claimed

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By ACDWebb
17th Sep 2004 10:45

Neil
For what it's worth your final point re a balancing charge being tax free is not quite right, as you would have needed to do some form of apportionment based on previous years claims as well as the final year, but that is not an issue here is it.

Certainly consider Phil's suggestion of waiving the WDA for the year which should maintain your written down value to claim in future years now the car is on the road again.

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