Cars and capital allowances – the solution
Businesses have now had time to think about the capital allowances changes introduced in April this year, and some have now evaluated the impact of the changes on their motoring costs. For many businesses the impact will be minor – small businesses do not tend to run a fleet of company cars, and even the proprietor’s car will either be owned personally and only business mileage charges paid, or will be leased by the company, so no capital allowances will be claimed.
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chancellors are sooooo 'fair' to taxpayers
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The ‘fraud’ not clearly explained in the ‘loss of balancing allowance’ change, is that getting the accumulated relief when the company finally ceases trading is just the time when a company will NOT want more tax allowances, as they are probably ceasing due to losses etc……
What is not covered however is:-
- what if all fixed assets are disposed of in a year ?- can you claim a balancing allowance?, and maybe then buy a new Bentley in the first week of the new accounts period?
- or maybe own each vehicle through a separate 100% subsidiary company so that each time the car is sold the company ceases, and use group relief to get the tax relief, or may be not a subsidiary at all, and use cross-charges.
- or some other ‘fraud’ to get what’s ours…..!
replies
OK I might not call it fraud, but yes, the loss of balancing allowance is the really big issue if you have cars which depreciate really fast and you change them regularly. I didn't spend much time on this as I have covered it in a previous article and assume everyione has worked out what the problem is - but wanted to suggest an answer.
As far as your specific points, I can give a bit more info : 1. Selling everything in a pool won't help because the main pool and the special rate pool don't provide a balancing allowance until cesstaion - that's not part of the change it has ever been thus. So no joy if you sell all or even if you sell your one Bentley Convertible and have no other assets in the special rate pool - WDA's continue (almost for ever!)
2. Putting cars in subsids would mean that they will have to hire them back to parent or something like this - or what is the trade? Ceasing a subsid then collecting BA is a good idea but is specifically rules out by anti avoidance legislation (i.e. they got there before you did) which prevents a BA if any other company in the group carries on the business of leasing within 6 months of the cessation of first company. If you don't lease or hire the car I'm not sure how you could make it work as then subsid has no business at all and nothing to set CA's against.
3. Well apart from my suggestions of low emissions which could put you in a better position than you are in now by front ending the depreciation there are a coupleof alternatives : (a) sole trader or partnership : private use adjustment means single asset pool is mandatory - a balancing allowance on sale of car follows; (b) a van - or more likely a double cab pick up with payload of more than a metric tonne. Make short life asset election if not able to claim AIA on it. (don't elect if you claim AIA - Duhhh) (mildly silly); (c) Honda VFR 1000 or similar (or Fireblade etc etc) AIA or de-pool if you buy 20....(not at all silly, even less practical...but probably a lot of fun)(being an oldie I choose Norton Commando 850, Triumph Tiger (650) - or Honda VFR750 which is quite ladylike and has elec start). Or a Reliant Robin, which I think still counts as a motorcycle - it did in my day (now that is very silly!)
Self drive car hire businesses
This was referred to above, but is it absolutely certain that what used to be called "qualifying hire cars" - ie an ordinary car used solely to hire short term to the public as part of a business - no longer has any sort of beneficial treatment for CA purposes? Do they all have to be pooled and in effect, never written off? This seems very unfair on the car hire business, who has always in the past been able to claim FYA on new vehicles bought to hire out. Anybody got a definitive answer on this question? Is there any way such vehicles can be "de-pooled"?
cars - LOWer emissions
Thank oyu RB for the reply,
The trouble is that the emissions level keeps being lowered as chancellor grubs around for more tax.
Similarly just as diesels pollute less per se, so Gordon in his infinite wisdom just brutally gave them a 3% 'bonus' to even things up (from his prespective).........
Car and Van hire companies
I assume that this does not apply to Van and car hire companies as these vehicles were always part of the general pool anyway.
Therefore, I assume that such vehicles will continue to be part of the general pool and companies will still be able to claim £50K annual investment allowance and 20% WDA regardless of the level of g/km CO2 per car/ van as long at the vehicle in question is part of the fleet that is being hired out to customers.
Kind Regards
Anon