Can you please help me out with this one? My client bought a car for business purposes (he is a driver), for £8,000 and sold it for £5,000 (in the same financial year-both the purchase and the sell). How do I reduce the tax bill on his personal Tax Return with the loss of £3,000? On capital allowances is I put: Written down value b/fwd: £8000 Less: disposal proceeds: £5000, I will remain with a residue of £3000 and it shows that I can claim WDA 6% of £180.... I`m lost... Thank you
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The car goes into the special rate pool, so it gets the 6% WDA each year on the remaining £3,000 balance. There is no immediate relief for this balance, nor is there an option to depool the car as a short life asset. You should know things like this. If you don't, then you should not be preparing tax returns.
It's probably in your clients best interest say they had some personal use of the car, on the presumption they are a sole trader. Then it will be in a separate pool and thus a balancing allowance will crystallise.
No private use, then £3,000 will be written down at the appropriate rate over a number of years.
You should complete some CPD!
It would be fraudulent if there was no private use, but if there was private use, it would be correct to treat it accordingly. Only the client knows (possibly).
In reality it probably is not, I very much doubt with any car owned by any sole trader there is no personal use at all, certainly I never came across such an occasion.
I'm enjoying how the text on Gia17's profile picture has dodged the Sift language filter.