I have a client who bought a car on HP ie he paid for half of the car at the start, monthly payments for 3 years with an option to make a final payment at the end for full ownership of the car. I understand that in this case capital allowances are allowable on the full value of the car at the outset. Can someone let me know what to do if the car is returned to the dealership after 3 years before the final payment is due? Can the WDV still be claimed until it's gone on the amount he actually paid (I assum not on the full value given that he didn't pay all of it)? He didn't get any money back for returning the car back to the dealership. I haven't come across this before! Thanks
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Just like any other disposal
Any liability foregone should be treated as the consideration.
Sale Price
The answer to your question is no - he no longer has the asset.
Presumably some of the payments under the contract weren't made. Or he'd've been daft to give the car back, wouldn't he ?
The value of those payments, less any interest content, is your sale price. How you treat that depends on how you've dealt with the Capital Allowances - is it pooled or a single asset pool ? Normal rules apply, anyway - sure you're familiar with them.
The vehicle has been sold
What the above are saying is that you treat it as a sale, with the sale proceeds being the money that should have been paid but never was.
So if the final installment due was £6500 balance and this was never physically paid as the vehicle was returned, in effect the dealership paid the client £6500 for the vehicle and the client paid the dealership the final instalment of £6500 (so no cash changed hands)
In or out
There are other things but each item has been itemised separately and then totalled so I can isolate it.
It's either in the pool or it's not.
Isolate it?
Do you understand the concept of pooling? I'm beginning to think that you're way out of your depth here.
Private use or pool?
Originally the car cost £10,000 - capital allowances would have been claimed on the full £10,000.
If there was private use of this asset (& it's not a limited company), then it should be a separate asset for capital allowances - the proceeds are then set against any balance brought forward. If there is anything left, the balance is then treated as a balancing allowance (or charge if too much had been claimed)
If no private use then it is in the pool and only the "proceeds" should be withdrawn from the pool. Any balance is effectively carried forward in the pool balance.
If a sole trader
and this is the owners car with a private use then it's presumably in a single asset / private use pool and there will be a balancing allowance or charge on the disposal event.
If it's a staff car for the sole trader, or the business is a limited company, then if acquired after April 2009 it will either form part of the general pool, orbe part of one of the special rate pools for 'clean / dirty' cars, in which case the disposal proceeds will come off the WDV of the particular pool and any balance will drip on until the business ceases.
EDIT - beaten to it