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Demonstration Car - 100% FYA

Anyone any experience claiming FYA on a demonstration car?

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Client is looking to purchase a low CO2 hybrid which on the face of it should qualify for 100% FYA.

 

It has been used as a demonstration car though which made me doubt the "new and unused" condition. However, I see that HMRC accept that a demonstarion car is new and unused for these purposes: https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23153

Their manual states this is the case, "even if it has been driven a limited number of miles for the purposes of testing, delivery, test driven by a potential purchaser, or used as a demonstration car."

This car has done around 8,000 miles, so wouldn't be considered a limited numebr fo miles in my opinion. But does the fact that the guidance uses "or" used as a demonstration car mean the mileage is less relevant here?

Has anyone got any experinece as to wheter the mileage is a releveant factor here, and if so what level HMRC deem acceptable?

Replies (18)

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By whitevanman
20th Nov 2019 09:55

The guidance you quote does not appear to link mileage with the "demonstrator" purpose - it says (in effect) has been used for a limited mileage OR used as a demonstrator. So I would say, at first sight, it qualifies. It seems clear that the legislation is intended to allow relief on new cars but to exclude 2nd hand ones. The problem is the English language - what is "new"? New to whom?
I think we are looking for what one would usually call "brand new" but with the commonsense provisos in the guidance.
This covers typical situations that arise when buying a "new" car from the dealers, but where some keen officers might argue whether a car was in fact "new".
That said, I too would be a little concerned by the mileage which looks high for a vehicle used only as a demonstrator. Has it also been used privately by the car sales staff? If so, that might alter the view expressed but you would only know what HMRC thought about that if you asked them (and sought the views of the HO technical specialist rather than the local officer).

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paddle steamer
By DJKL
20th Nov 2019 10:09

8k miles in a demonstrator is pretty high to the say the least, are you sure it has not also been a showroom staff car to get that sort of mileage? (Salesmen have run it as their company car)

(Edit-have just seen Whitevanman has made that point)

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Replying to DJKL:
Lone Wolf
By Lone_Wolf
20th Nov 2019 11:35

I thought the mileage was on the high side too, hence my concern. I'd have expected the mileage to be below 1,000 miles if I'm honest, but then who knows. Client has advised it is ex-demonstration - I'm guessing the dealer will describe it as such on the sales invoice...

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By Tax Dragon
20th Nov 2019 10:25

The sentence you quote looks like it was written over time (or 'edited', for short). Someone thought "it's obviously new if all that's happened is it's been tested and/or delivered"; someone else thought "what about test drives? You're still buying a new car." Finally, someone (in my view questionably) added demonstration cars – some reviewers just have to make changes. At the same time, they moved the and/or to the last addition and crossed out the and/, not realising that by so doing they'd left a sentence that doesn't make sense.
So I agree with wvm's interpretation of the sentence; I also think a car that's done 8,000 miles probably isn't "unused" – the word (as you note) in the statutory test.

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By The Dullard
20th Nov 2019 10:39

I'd suggest that HMRC are simply interpreting the word "unused" in CAA 2001, s 45D(1)(b) in the context of the words that follow it ("and not second hand"), and have made a policy decision that having been used by the dealership as a demonstrator is not sufficient to make a vehicle second-hand.

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Replying to The Dullard:
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By Tax Dragon
20th Nov 2019 10:46

I'd say those are two distinct tests. You are suggesting that "is unused and" is otiose.

Edit... maybe not the "is".

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Replying to Tax Dragon:
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By The Dullard
20th Nov 2019 10:57

I do find it hard to imagine how a second-hand car would ever not be unused, nor how an unused car would ever be second-hand.

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Replying to The Dullard:
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By Tax Dragon
20th Nov 2019 11:07

The Dullard wrote:

I do find it hard to imagine how a second-hand car would ever not be unused...

Do(n't) you mean "never"? I feel there's a negative missing somewhere.

What about a car that is used by the dealer?

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Replying to Tax Dragon:
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By The Dullard
20th Nov 2019 11:14

Are we not going back to my original point?

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Replying to The Dullard:
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By Tax Dragon
20th Nov 2019 11:24

We're going back to the question, I think.

Common parlance does not describe cars bought from dealers as second-hand. The dictionary seems to imply the need for an intermediary owner too. Whilst other – more helpful to your argument – definitions are available, the word is ambiguous. "Unused" is, I suggest, more objective.

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Replying to Tax Dragon:
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By The Dullard
20th Nov 2019 11:42

And so the explanation for HMRC accepting ex-demonstrator vehicles as "unused", is because they are interpreting "unused" as meaning other than "second-hand". N'est-ce pas?

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Replying to The Dullard:
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By Tax Dragon
20th Nov 2019 11:51

Have we not now gone back to my first point? It's two tests, not one.

I thought you were saying otherwise. I apologise if I misread.

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Replying to Tax Dragon:
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By The Dullard
20th Nov 2019 12:39

No your point, if I understand you correctly, is that the words "and not second-hand" (your second test) are unnecessary. I am not suggesting that they have any meaning either; simply that HMRC might have thought that not having any apparent meaning they were there to explain what the draftsman meant by unused.

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Replying to The Dullard:
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By Tax Dragon
20th Nov 2019 13:06

The Dullard wrote:

No your point… is that the words "and not second-hand" (your second test) are unnecessary.

It is?... It is! Gosh I amaze myself with my insightfulness sometimes! :-)

(As well as a pdf of the guidance, I'd want a document on file from the wheel-dealer. But never teach a wolf to suck eggs, as granny used to say.)

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By The Dullard
20th Nov 2019 11:43

Keep a pdf print of the current guidance. Claim FYA. Warn client HMRC can and does change its mind. Job done!

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Replying to The Dullard:
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By Tax Dragon
20th Nov 2019 12:11

A practical approach. (Edit: though it glosses over wvm/DJKL's point.)

Since the guidance isn't coherent, would you add a WSN?

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Replying to Tax Dragon:
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By The Dullard
20th Nov 2019 12:36

Why? That's to avoid discovery, and you have evidence of prevailing practice (ie following HMRC extant guidance).

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Replying to The Dullard:
Lone Wolf
By Lone_Wolf
21st Nov 2019 10:52

Is what I'll be doing, with emphasis on the part about HMRC potentially changing their mind to suit themselves.

Thanks for all the comments.

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