Can courtesy cars ever be treated as plant

This is for the purpose of capital allowances

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In a bit of a back and forth with a client over this point. To set the context they are an accident repair shop and have contracts with various insurers that stipulate the "provision of courtesty cars". I have zero issue on VAT, that these are not even pool cars as the employees do not drive them, simply available to the insured party. 

Their argument is two fold, they are plant not cars becasue of the use they are put to, and secondly it seems to be an industry precedent to treat as plant and thus eligible for AIA's

The legislation seems pretty clear, if it looks like a car and is used as a car it is a car. There is exceptions for Hackney carriages, hearses which makes sense, but these are Citreon C3's and they simply replace temporarily the insured's own car whilst they go about everyday business. To add this is a newish client but this is the first year for me where they have replaced / renewed the cars. I did look at the 2022 CT return and the previous accountants had claimed AIA - because every one else does ! 

Replies (10)

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paddle steamer
By DJKL
13th May 2024 16:38

Are they not in effect acting as a hirer of these vehicles, whilst the insurance companies may not pay explicitly for the hires presumably the cost of the provision of these cars is rolled into what is charged for repairs?

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Replying to DJKL:
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By mkowl
13th May 2024 17:32

Yes that is the case. My client acquires the cars, the latest batch were on HP deals, in the past they have done monthly contract hire. But there is no charge to the customer - they normally settle just the insurance excess, balance from the insurer and there is no re-charge to the insurance companies for the provision of a vehicle. So the courtesy cars are just a direct cost to the company funded out of overall profits made. The client argument does have a logic but they are focused on the use of the cars - but the Capital Allowances Act basically stipulates the use is not really relevant.

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Replying to DJKL:
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By Paul Crowley
13th May 2024 18:00

I would be prepared to agree on that as a defendable opinion. Repair cost as charged includes there in an implicit hire fee. Therefore the cars are hire cars.
I would however insist that the cars have mileage record just like pool cars.
Either way, capital allowances are a timing thing, not a permanent tax difference.

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Replying to Paul Crowley:
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By mkowl
14th May 2024 07:56

Thanks for the links - I had done a search on here and Google and most support the assertion that its a car, there is no special rule as would apply to Hackney Cabs or a funeral car just because its a courtesy car

As pointed out then ultimately this is a timing issue as to when tax relief is obtained, but get it wrong HMRC will seek the tax, interest and penalties come what may and the client will conveniently forget their strong views should that arise.

I don't mind presenting a case to HMRC when its based on judgement of accounting standards, but this seems to be where the factual interpretation of the words in the legislation would be salient. And its a classic reverse definition

A vehicle is not a car for capital allowance purposes if

a) its a type not commonly used as a private vehicle AND
b) unsuitable to be so used

These are Citreon C3's so having had one myself in the past then its a car. And in this scenario the customer is using the vehicle in the same manner as the vehicle being repaired.

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VAT
By Jason Croke
13th May 2024 19:28

Can a courtesy car be treated as plant?

Only if it is a Nissan Leaf.

I'll get my coat......

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Replying to Jason Croke:
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By Paul Crowley
13th May 2024 23:40

You are barking up the wrong tree.

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Replying to Paul Crowley:
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By Tax Dragon
14th May 2024 06:18

Paul Crowley wrote:

You are barking up the wrong tree.

A corker?

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Replying to Jason Croke:
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By mkowl
14th May 2024 07:38

You get a +1 for that

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Replying to Jason Croke:
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By Mr_awol
14th May 2024 16:58

Jason Croke wrote:

Only if it is a Nissan Leaf.

Arguably a Toyota Corolla too - although the leaf works much better (whereas the Corolla might need explaining)

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