Self Employed Capital Allowance

Self Employed Capital Allowance

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Hi, If you are self employed and you purchased your car before your registered for self employment can you introduce the car into  the business and how much can you claim back in the first year (car purchase price was under 2K) thank you in advance for any help.  

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By Chris Smail
13th Feb 2013 15:53

Claim mileage

45 per mile

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By redman7
14th Feb 2013 08:50

Assuming your turnover at the date you bring the car into the business is below the vat threshold you can choose either method, if you are above it you cannot use the mileage method, at least that is my understanding

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By User deleted
15th Feb 2013 14:49

Correct, redman7

Illustrating the danger of not stating assumptions, as the previous poster failed to do :)

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By Triggle
15th Feb 2013 16:42

If claimable, the mileage rate does not cover all car expenses. Parking fees, road/bridge tolls and the congestion charge, if incurred on business, can be claimed in addition to the mileage claim. I also believe that you can additionally claim parking fines if you can prove that they were incurred wholly and exclusively for business purposes and not of a criminal nature?

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By User deleted
15th Feb 2013 16:57

Parking fines for a sole trader?

I also believe that you can additionally claim parking fines if you can prove that they were incurred wholly and exclusively for business purposes and not of a criminal nature?

Good luck with that one.

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By George Attazder
15th Feb 2013 17:13

Parking fines...

... definitely aren't criminal in nature. They're civil obligations!

As BKD says though, no hope of getting relief.

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By Triggle
15th Feb 2013 17:52

Sorry I'm not a lawyer so the phrasiology may be wrong. Perhaps I should have put criminal in inverted commas.

What I'm getting at here is that if the parking fine was incurred for, say, parking in a public place on a double yellow line, parking in a place likely to cause obstruction to other road users or for parking in a position that would impede access to other vehicles such as ambulances and fire engines then I would not think it claimable in any case.

However, if the parking fine was incurred for overstaying in a properly marked bay in a car park on private land I would claim it. As I see it all the 'fine' is is an excess parking charge.

 

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By Boycie
15th Feb 2013 21:40

Full marks, Basil . Must try harder, BKD.

Full marks, fawltybasil !.Your comments are correct in every detail.    Redman7 is right about the turnover level, but of course the question relates to a car bought before the start of the business.  So at that time the turnover must be nil ( and even if you use  the date on which the car is introduced, which in this case is the start of the business, then the turnover is still nil). 

Triggle is right about tolls etc, but these are not expenses of the car itself, and I  put them in sundry expenses.   Parking fines - Triggle may be right on the excess parking thing but too small to think about at 9 oclock at night. 

I have just joined this Aweb club .  A mixture of good and bad, mostly good.  Very good ones like yours Basil, full of detail and really helpful . But too many others are just trying to be clever and fall flat on their faces . Please note, BKD .  Many of your comments on other questions are very good too, but too often you dont read other peoples comments  properly. "Not stating assumptions " is aimed at Basil, but you are bang out of order - it is you who is in the wrong, not Basil .   Basil made no assumption about the turnover.   " Failed" indeed - you didnt read the question.   Come on now, BKD, play the game. 

To be fair though, BKD, Chris hasn't read the question properly either.  

Thanks again Baz.

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Replying to lauraratcliffe:
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By User deleted
16th Feb 2013 11:45

Explain, please

Boycie wrote:

 Basil made no assumption about the turnover.   " Failed" indeed - you didnt read the question.   Come on now, BKD, play the game. 

What makes you think that I didn't read the question?

Basil said that he was pretty certain that the mileage basis would be more appropriate in the OP's circumstances. Therefore, he must have assumed that the turnover test was met. How else could he be so certain?

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By George Attazder
16th Feb 2013 10:37

Actually Boycie

It's the annual turnover when the car is acquired by the business. Not when it is acquired by the individual who goes on to run the business.

Of course the business has no annual turnover before it starts.

But since this is (currently) a concessional treatment, I'm sure HMRC would disagree with you if the business had commenced with an expected first year turnover above the VAT registration threshold.

So I think it is fair to say that Basil did make an assumption.

Boysie wrote:

But too many others are just trying to be clever and fall flat on their faces.

I agree. Great post!

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By Boycie
16th Feb 2013 11:49

Please get it right, George.

No, George.   You are as guilty as BKD of not reading the Helpsheet.   The words are "annual turnover of the business at the time the vehicle is acquired".   To the normal person, this means the time when the individual ( in this case) "acquires" the vehicle.   But if we assume that your alternative theory is correct, ie that "acquired" means "acquired by the business" ( to be fair this is just possibly an alternative meaning ) then in the case of jaynesmokey, this is a new business anyway, so the turnover is still nil at the start.    Your theory of "expected first year turnover" is novel , but you are trying to re-write the Helpsheet ! I am sorry for having to say this, George, but it is you who is making assumptions, ie that those tax office guys are going to interpret their own Helpsheet to mean something which is the exact opposite of what they have said in the Helpsheet. 

You are probably too young to remember but when VAT started there was a rule about expected turnover, for VAT registrations - the rule was soon found to be unworkable and unfair.  So if your theory was correct then a trader who expected his turnover to be below the VAT threshold, and who therefore recorded his business mileage faithfully intending to use the mileage basis - if he then found  after a year that his turnover unexpectedly had increased to well above the VAT threshold, he would be really upset if those tax office guys told him that he had to go back and find all the details of his car expenses because he should have known that his turnover would be above the registration limit as he could not use the mileage basis after all.  I think that desperation has crept into your argument, George - I hate to say again that you are making assumptions, but you are !   

So sorry George, but Basil was correct in every detail, and did not make any invalid assumptions.  You rightly say that Basil's "post" ( I must try to get the hang of this"AWEBspeak") was "great".    But it is tempting to say that you have been just as "clever" as BKD - to the point of desperation - in trying to find a "fault" in "fawltybasils"  excellent and thorough explanation of the rules.  You have failed George - sorry again.   

My name is "Boycie" not "Boysie" by the way,

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By User deleted
16th Feb 2013 11:56

Excess charges

The argument about excess charges is an interesting (and old) one - I'm not sure if there is much in the way of guidance or case law. There are a number of possibilities where the car has been parked in an authorised bay:

No parking paid at all. I would say that is a breach of local authority regulations, so should be treated as a fine.

Parking paid for the maximum permitted time, but vehicle left there longer. Again, I would say that there is a breach of regulations.

But what if the paid-for time has been exceeded, but still within the permitted maximum? Arguably the charge is indeed nothing more than a further charge for the extra parking time.

In practice, level of penatlies are such that it not worth the time and effort to worry about (and try to separate between fines and excess charges), and simply disallow.

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By User deleted
16th Feb 2013 15:05

Picking nits

I accept that the test is applied at the time that the vehicle is first used (not acquired) by the business. But two points:

The test is based not on actual turnover to that date, but the annual level of turnover at that date - there is a difference. So if on day 1 the turnover is £500, it MAY BE, DEPENDING ON CIRCUMSTANCES, reasonable to assume that annual turnover is in excess of the limit. Otherwise, every new business, regardless of size, will - according to your strange logic (very similar to Basil's, BTW) - be entitled to use the mileage basis until the vehicle is replaced. Your attempt at defeating George is laughable - if in your example the trader could demonstrate that his annual turnover was below limit at commencement, it is highly unlikely that HMRC would refuse the mileage basis. If  on the other hand it was obvious that annual t/o was in excess, a different story.

Secondly, nowhere does the OP say that the car is to be transferred in at commencement. So yet another assumption, on your part.

EDITED - words in CAPITALS above added, with apologies to those that did not understand the point being made - there is not enough room or time in the day to list all the possible assumptions

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By George Attazder
16th Feb 2013 12:41

@Boysie Woysie

RTFM. Not the idiot guidance.

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By Boycie
16th Feb 2013 14:03

Assumptions assumptions assumptions !

To BKD.  Describing my words as "laughable" is aggressive and disrespectful.....   even ignoring the fact that you are simply wrong.   I shall try to be more respectful to you. and hope that you can moderate your language.

    In many respects you have not read my comments or at least not read them properly.  Your view of assumptions is that any assumption by Basil, even an obvious and sensible one, must be condemned, whereas an assumption by you is reasonable - that is not a sensible view from someone who probably is a professional ( sorry for the assumtion!) of some sort.   You try to condemn an assumption ( in my view a wholly reasonable one, in the circumstances outlined) that the car would be introduced at the start ( yes it is just distantly possible that the trader  intends to buy another car to start the business, and then introduce the existing car a later date - a very distant one to be sure), BUT conversely - almost perversely- you say it is reasonable to assume that if the turnover on day 1 is £500 then the annual turnover will be likely to exceed the registration limit - this ASSUMES that we are considering a business with a relatively stable daily turnover ( say a retail shop) - but if the business is a contractor, or any of a number of a different businesses which invoices a customer for a monthly ( or weekly even)  fee/charge of £500, then the turnover will be massively below the limit ( there are numerous other examples which I could quote to disprove yor theory).    So do  please try to show some consistency and judgment in your comments .

Having thus disproved your illogical closing paragraph, and I am assuming ( reasonably I hope again !) that your last offering is directed to me, you start by claiming to "accept" that first use is the definition of acquisition - that is not what I said at all ! - again, you have not read my comments properly.  You then wander off into wonderland, by implying that a trader has to notify the tax office at the start of what his expected turnover will be.

Please remember that the question is brief and we MUST make reasonable assumptions, which is what Basil has done. I am an accountant in practice and know that what Basil explained was ACCURATE and I hope very helpful to jaynesmokey.  What she makes of the attempts by you and George to ( yes, you said it) nitpick, I dread to think.  If she reads this series of replies, I suggest that she just reads Basil's comments ONLY ( as everything else , including the comments by you, George,  and Chris ,and yes me too - since I have just had to explain why you and George are so misguided).   Basil was right in every detail.

A little dose of humility would not do George and you any harm.  Can we agree please to end this silliness ?

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By Boycie
16th Feb 2013 14:07

Speechless

To George.  By last message to BKD was written before I saw your 12.41 remark.  I am speechless but I refuse to sink to that level of debate.

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Replying to Livepay:
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By User deleted
16th Feb 2013 14:38

.

Boycie wrote:

 I am speechless

Thank Heaven for small mercies

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By User deleted
16th Feb 2013 15:27

You've missed the point

First of all, when George made a reasonable, and obvious, assumption - elsewhere - but failed to state that assumption he was told by 'Basil' in no uncertain terms that he was wrong. It therefore follows that Basil, in failing to state his assumptions (however reasonable) is equally wrong.

Please remember that the question is brief

Shame you cannot apply that to your responses - I suspect that you have been reading too much of Basil's drivel. To the extent that you're now also mimicking his use of CAPITALS.

My "£500" example was nothing more than an illustration of the principle that annual turnover can be estimated at day 1. Of course it will depend on actual circumstances and other assumptions - I never implied that there is a need to advise the tax office of estimated turnover, the trader simply uses the basis that is appropriate to his circumstances. That basis may well be appropriate in the OP's circumstances - but no-one can advise her that that is the case without making assumptions. And in giving that advice, one should state what those assumptions are.

Basil was right in every detail

Only on the basis that certain, unstated, assumptions are valid.

Basil once described George and me as the Two Ronnies (which I took as a compliment). Seems that in you and Basil we have Laurel and Hardy - without the humour.

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By Chris Smail
19th Feb 2013 13:51

Claim mileage - 45 per mile

car purchase price was under 2K

You daft lot

Yes you can introduce the car but the circumstances which make it worthwhile to do the apportionment calculations rather then just claiming the mileage are extremely limited.

No I cannot be bothered to work out the exact circumstances when it would be worthwhile, particularly as I would have to makes assumptions about maintenance costs and so on which would lead to another ruck.

 

 

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By thomas34
19th Feb 2013 14:07

Mileage Rate

Chris - how dare you restrict yourself to one sentence answers without listing all the permutations and assumptions. On another subject has anyone noticed that under the proposed cash accounting technical note dated 11 December 2012 the rate for mileage above 10,000 is 24p? Will this be the rate for 2013/2014 or just for those using cash accounting?

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By George Attazder
19th Feb 2013 14:50

Thomas

In the draft legislation and the explanatory notes to it, the rate above 10,000 miles is still 25p. The 24p rate is for motorcycles. I'm not sure what it is you're reading, but it sounds like either there's a typo in it, or you've had an eyepo.

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By thomas34
19th Feb 2013 17:01

Technical Note

George - it's a typo, not me I'm pleased to say. The technical note dated 11/12/12, which I printed out, has transposed the two figures i.e. it says 24p for the car and 25p for the motor cycle. Just pleased that I'm having no involvement with this new farce.

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By Boycie
19th Feb 2013 19:20

The written word.

A problem with the written word is that occasionally it is unclear whether the writer is being serious or whimsical.  So, to Chris and Thomas, please let me know whether your posts today were in the serious or whimsical category.

  I think we might all be a smidgeon offended if Chris really thinks we are a"daft lot" for discussing a potentially very important choice available to taxpayers - really, whilst a low car value would in most cases render the use of the mileage rates as preferable, there can be many cases where the correct "actual"  expense figures produce a considerable taxation saving in comparison with the 45/25p basis, with minimal work.   I will be happy to explain further if anyone wants to send me a "PM" - this comment is really for the benefit of "non-accountants" as accountants will know why it is important to consider both methods in most cases.  

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By Triggle
19th Feb 2013 20:30

It's a shame that this thread went the way it did. I didn't get a full answer about a fine incurred on private land (e.g. declamping charge for overstaying in Sainsbury's car park when on a plumbing job) but, oh hum - it was off topic anyway.

None us asked the OP what their self employment was. They may be a second hand car dealer, a driving instructor or be operating a breaker's yard for what all we know.

Is declamping a word?

____________________

File under "Whimsy".

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Replying to johngroganjga:
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By DMGbus
20th Feb 2013 13:27

A fine or a contractual penalty

My recollection of the basis of disallowance of fines as a tax deductible expense is that I was taught, some decades ago, that it was "not public policy to give tax relief for breaking the law".

So, my approach is to see if a (public) law has been broken.

Speeding on a public highway = breaking the law =  disallowable.

Contrast this with breach of commercial contractual terms.   Exceed overdraft limit - the bank charge extra fees (some would describe them punitive "fines") - tax allowable as no public law has been broken, but rather contractual terms broken and face the commercial consequences.

So, lets look at Sainsbury's car park.  By entering the car park you agree to the contractual terms which might dictate punitive higher charges (some might describe as a penalty or a "fine") for exceeding a prescribed time limit.  These fees / "fines" are NOT breaking the law, they are breach of contract / enforcement of contractual terms.  Therefore tax allowable. 

 

 

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By Triggle
19th Feb 2013 21:51

Thank you DMGbus. That's how I've always viewed it - it's good to get third party confirmation.

The trouble is that if you tell a client that all motoring fines are not allowable per se they don't tell you about the Sainsbury's types and lose out.

Other supermarket carparks are available.

 

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By Chris Smail
20th Feb 2013 09:58

It all depends.....

That is how every response to a tax query should start.

If the punter was in front of me I would 'do the math' based on the exact circumstances. I would expect to get the answer 'claim mileage' as it is not the correct answer only when the vehicle in question is exceptionally expensive to run. So, to repeat myself:

Yes you can introduce the car but the circumstances which make it worthwhile to do the apportionment calculations rather then just claiming the mileage are extremely limited.

Boycie I would be very pleased to see the assumptions which make apportionment worthwhile with a capital cost of £2,000 if you have them to hand, my first guess was 'Never', I did not think the lines intercept on any reasonable assumption of mileage to put it in quadratic terms so I did not set out to solve it.

DMGbus I think you are exactly right on penalties.

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By DMGbus
20th Feb 2013 13:37

Recent case, earlier this week

I visited a prospective new client on Monday of this week.

His car had cost him £1700 to buy 5 years ago (before his current business had started).

I worked out his running costs at 32.1 pence per mile - so advice was keep a mileage record and claim 45 pence per mile.   Result: about £340 tax/NIC annual saving arising from a 10 minute discussion and computation.

A big thing is capital cost of the vehicle - and capital allowances that follow from this (plus finance interest if any that equally follows).

As an example: recent publicised statistics (manufacturers projection) stated that the running costs of a very fuel efficient car qualifying for 100% energy efficient capital allowance claim amounted to approximately 60 pence per mile.   

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By Boycie
20th Feb 2013 20:52

Daft or not, here are the figures.

To Chris Smail.  I was hoping you would say that your earlier post was whimsical but it appears not so, from your post today.  You said in your second post that you "cannot be bothered", when the car value is £2000, to work out whether the precise basis may be  better than the 45/25p. You have asked for my figures to support my view the view in my 19 February post.  I could give you many many examples, but here are a few facts and figures which may help.

 1. High business to total mileage ratio - could be up to 100% of course ( eg second car, used by wife during the day,   and/or just a "better" car, for private use ; or uses motorcyle for private use - may just want private motoring to be a "clean" car if using a "dirty" car for carrying building materials etc during the day; or business car is a two door whereas "private" 4 door car need for family use for private etc etc).  Say 1500 miles - business only

2.High Capital Allowances ( sale in the period at much less than opening value, due to uninsured accident damage, blown engine etc) - anything up to £2000.

3. Insurance.  £1000, £2000, £3000 - you name it.  Taxpayer is very young new policyholder and/or has poor claims record - -  premiums well into five figures not unknown - I have just enquired with a broker for a 19 year old builder  with a licence of under one year - no company will even quote !    Friend aged 19 (lady) - no problem aspects other than age £3500 premium - say a builder aged 19 - £4500. 

4. Reapirs.  Mechanical severe breakdown and/or accident damage etc etc -  £500 / £1000 /£1500.    say £1500

5. Licence and AA . £300

6. HP Interest. £150.

7. Car Wash. £250.

8. Fuel . 1500 miles @15p = £225.

Total £8925 .  1500 miles therefore just under £6  per mile. !  Yes I know some figures are on high side, but some could be higher ( especially insurance).  So claim 1500 miles at 45p = £675, compared with £8925.    On 1500 miles the claim is fixed at £675 - knock off the Fuel element £225 leaves £450.    So if items   2 to 7 are more than £450, the precise method is better.   

SO IF YOU ONLY HAVE  the minimum Capital Allowances, are lucky to have no repairs, and get your insurance for £400 you are STILL better off on the precise basis !! !

On not 1500 but 15000 miles you are STILL BETTER OFF on the precise basis where the costs per 3 and/or 4 and/or 5 are high.

So, on a low value car,  you should be thinking about A. the costs per 3,4 and 5 above and B the mileage ( business mileage as an absolute and as a proportion of the total mileage - the saving in tax etc is lower where the private mileage is significant).

 If saving my clients up to possibly (OK at the extreme) a few THOUSAND pounds makes me guilty of the charge of being "daft", then I shall serve my sentence with a clear conscience - and YOU Chris ?   

Regards.

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By User deleted
20th Feb 2013 21:17

Can't dispute your figures, Boysie

But perhaps you didn't see this part of Chris's post, in which case I'll make it stand out for you:

"I did not think the lines intercept on any reasonable assumption of mileage"

As for your assumptions about insurance levels, catastrophic mechanical failure (repaired) and subsequent blown engine all in the one year - well, I suppose it could happen and there's no doubt that a mileage basis would be inappropriate. But I wonder how many of us living on planet Earth have encountered such circumstances more than once in our professional lives.

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By Boycie
20th Feb 2013 22:08

EMBOLDENED, but to no avail.

To BKD.  I ALWAYS read posts VERY carefully !  So the emboldening was quite unnecessary !

If you read my post again you will see that (1) I explained that there is  a saving on 15000 MILES also - impliedly you think that is  an UNREASONABLE figure, and (2) there does NOT need to be a "catastrophic" year of calamities to disprove my comments  - polemics are very amusing, but when incorrectly used they just distort matters.  

  Just PLEASE read my post AGAIN - I tried to give a range of figures and clearly explained that I had used some extreme figures BUT I ALSO pointed out that even on "normal" figures it was essential to "do the maths"to see if any saving in tax was possible .     I said correctly that there were  occasions where there was  a potential saving of thousands of pounds.   I clearly said that I could give "many examples".- I supplied the FRAMEWORK to enable readers of the post to prepare calculations, having explained the principle.  If, as I assume, BKD, you are or have been an accountant then you know that your comments are simply DISINGENUOUS and that my post was correct in principle and in detail.   ANY self-respecting person who has spent material time in the profession knows that my post was correct. I spent some time in preparing the figures , with the intention of being of help to readers who are  NOT in the accountancy profession.   Since I surmise that about 80% or 90% of readers are in our profession, then I am content that they form their own opinion.  

If any readers from outside the profession want to contact me( or someone very new to the profession who does not fully understand my last post, or my earlier posts), please send a PERSONAL MESSAGE (PM) to me, as I will be happy to help. 

 

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