Client(Taxi Operator) has always bought his cars outright. Now for first time has taken on hire purchase. Previously it has been the case where the full cost of car has been offset for taxation purposes. With hire purchase, is it the case that only the amount actually paid in the financial year can be used?
Thanks in advance.
Joe Rice
Replies (4)
Please login or register to join the discussion.
Tax allowances on buying a car
When the car is bought on HP or bank loan or outright the tax allowances are claimed in the form of Capital Allowances on the full purchase price(and a computed amount of interest if any paid, not mentioned in Phil's answer). The Capital Allowances may need to be restricted if the cost price of the car is more thasn £12000.
However when you talk about claiming the actual payments made, you might be thinking about what happens if the car were bought on Lease Purchase (a finance lease) or Rented (operating lease).
In the case of Lease Purchase although accounting rules might require the treatment on the accounts as if bought on HP (including computation of a fictitious hypothetical interest charge), however the tax allowances are THEN only claimable on the payments made.