DP Walsh
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Can a company claim tax relief on the purchase of an asset not necessary for business use

Can a company claim tax relief on the purchase...


A company director with no employees wants to spend several thousands on a push bike for which he would use for both short business journeys and personal travel. 

Obviously such an expensive bicycle is not necessary for short business journeys. 

Am I right that HMRC could and should object to the company claiming the AIA on an asset that costs a lot more than is necessary for the purposes of the business?

I would also be interested in any BIK implications, considering that under normal circumstances there is no BIK on private use of bicycles by employees as long as it is also used for work travel.



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03rd Mar 2016 13:16

Necessity does not come into it.

If a company purchases an asset, which it will provide to an employee to keep them happy, then the expenditure has been incurred for the purposes of the qualifying activity carried on by the company, and it can claim AIA. No ifs. No buts.

BUT, the employee may have a benefit in kind, in relation to the asset so made available.

Now there is an exemption where the asset concerned is a cycle AND that cycle is used MAINLY for qualifying journeys (being commuting and business use).


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03rd Mar 2016 13:50

Spot on Portia

Back in the dark corners of case law there was a case (Chambers, I think) where the taxpayer used a Bentley to transport sheep.  HMIT argued that this was excessive, and a cheap van would have been sufficient.  They thus sort to restrict the running expenses accordingly.  HMIT won, but the case is not seen as 'good law' in that it is a business decision as to how much is spent on an item and a question of fact as to whether or not it is 'used for business purposes'.

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03rd Mar 2016 15:53


Not seen as 'good law'?

HMRC still see it as applicable - see CA23525.

Given what seems to be a one man company I think there's a possibility that HMRC could mount a challenge.  Is it W&E? 




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04th Mar 2016 14:10

Wholly and exlusively is also irrelevant.

The expenditure must be incurred, at least in part, for the purposes of the qualifying activity. To the extent that the expenditure is not incurred wholly for such purposes, allowances are restricted.

Since companies cannot have private purposes (including "choice", there would be no restriction in the circumstances described in the OP.

The private use by the employee (director) is taken account of by the fact that there is a benefit in kind, which may be exempt in these circumstances.

I thought I had explained that adequately.

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