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Balancing Charge Private Use Element

Balancing Charge Private Use Element

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Morning all,

I have a client who acquired an electric hybrid car with CO2 emissions <50g/km, and claimed first year allowances, which was restricted for private use as follows

2018/19 = £25,000 Capital cost, FYA £25,000, Private Use Restriction 25%

2018/19 = £400 revenue expenses, Private Use Restriction 25%

2019/20 = £300 revenue expenses, Private Use Restriction 45%

2020/21 = £200 revenue expenses, Private Use Restriction 95%

2020/21 = Vehicle Disposed, £10,000 Proceeds, Balancing Charge £10,000

My question is, would it be acceptable for the Private Use Restrication to reflect the 95% applied to the balancing charge as it has been applied to the revenue expenses?

Any views would be greatly appreciated.

Many thanks

Replies (4)

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By Laurence52
13th Jan 2022 10:51

One of my clients sold a car where the private use element varied each year and was much higher in 20/21 when sold (due to the lockdown).
As I had the business mileage and total mileage for each year I calculated the balancing charge as:
((Cost - proceeds) x total business mileage / total mileage) - capital allowances claimed in previous years.
The business and total mileage for each year were actual figures, with no estimates so my calculation was supportable if HMRC enquired.
That seemed to be the fairest way of doing this. It wasn't an electric car and the amount claimed in 20/21 didn't seem unusual.

Thanks (1)
RLI
By lionofludesch
13th Jan 2022 11:01

There's no set rule for this, so far as I'm aware, but you need to reflect the changing private use somehow. Just using the latest proportion isn't good enough, imho.

If you have the mileage figures for each year, use those. If not, averaging out the four private percentages will show that you've at least made the effort.

In a phrase, do your best.

Thanks (1)
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By Paul Crowley
13th Jan 2022 12:30

Had not really thought about this as a tax avoidance scheme before, but clearly if last year is the only one that matters then declare all miles as private and no tax to pay.

As such I am inclined to agree lion and Lawrence

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By Tax Dragon
13th Jan 2022 12:46

It has to be just and reasonable.

Patently, 95% is neither.

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