With apologies (not really) for the bluntness, I'm fed up with people using this forum as a substitute for proper training. If you don't know the answers to the above, which is about as basic as it gets, then you really shouldn't be preparing tax returns for traders.
I can prepare the returns and know the answers to the questions I'm asking, sometimes when you've prepared returns for years and years then you may have tips to get a little more out of the return. In addition, when you're starting out putting your training into practice sometimes it's nice just to have things/your thoughts confirmed is all.
I wouldn't say a family member purchasing a car on a credit card then someone paying them each month is something you'd come across often.
Really though, you needn't have taken time out of your day to post such a pointless response. Why not just don't bother replying to things that displease you?
You start with your answers first then and we'll tell you if you're right. The way you worded your question it sounded like you had no idea about any of it but I'm sure that was just an error.
I'm replying too - but only to let you know that I don't appreciate being treated like carp.
It's not even a question.
If you can't deal with a car purchase on a credit card, you shouldn't be dealing with the return.
"I can prepare the returns and know the answers to the questions I'm asking"
So why bother to ask the questions?
The family/credit card scenario is less uncommon than you might think. Not that frequency has anything to do with it - it's such a basic point.
My response was not pointless - hopefully (I'm not optimistic) if I and others continue to make the same point, the penny will eventually drop that Accounting Web is not a free training organisation.
It would make very little sense to include a 10% private use adjustment if there was no private use.
Agreed. Although it might be wise to drive to the shops once a year and establish a tiny amount of private use.
Apologies to have caused any offence or treated anyone like crap (which seems a little extreme). I needn't have posted and will refrain from doing so in these cases. I have adequate training and capabilities.
Sometimes I dither over things I know for-well the answers to but appreciate this forum isn't for ratification.
Here is the original question, since the OP has decided to continue treating us all like carp by removing it.
I have two queries that I hope the experience of the forum can help me with!
1. I have never dealt with a hire purchase in a tax return before and would be grateful if someone could advise on how claim these expenses:
I was told the vehicle is used solely for business purposes (driving instructor) - does it make any tax sense to put a small proportion to private use e.g. 10%?
How much of the monthly payments are allowable expenses? A fee was paid to return the vehicle early, can this all be claimed?
Generally how you would advise dealing with this as I want to ensure I'm getting everything right.
2. Once they paid to return the vehicle, a family member purchased a car on their credit card for them. They then pay monthly to their relatives credit card. How would you advise this is best dealt with in the SA?
Thanks in advance!
Oh - there was a question, was there ?
Well, that solves a mystery.
There is really no need to continue the thread.
I asked a question that didn't need to be asked because I was dithering over something I already know. That was pointed out and I apologized for that.
What exactly else would you like me to do?
Although I said there was no need to continue this thread. I feel I would like to post something in order to (hopefully) show that I'm not trying to take the pee out of anybody and to clarify my intending meaning for posting.
For people questioning whether I was just trying to seek free instruction, that was not my intention. It was simply a confirmation of my understanding which is:
Given the vehicle is on a hire purchase (rather than a lease) then the total cost of the vehicle (excluding any interest etc) would be placed into the the main pool (less than 120g/km CO2) and capital allowances claimed on it as per the normal rates.
The interest element of any monthly payments put through allowable expenses, as well as repairs, fuel, insurance etc etc
However, this may not have been clear from my OP. I'm not total clear on what happens when the car is returned. Is this treated as a normal disposal in the pool?
I hope that clarifies my OP slightly and does not agitate further!
PS My comment on personal use was to clarify there was no benefit to having the vehicle single pool but given it will be subject to the same rates then I see no benefit.
Wouldn't driving instructors car qualify for AIA?
The vehicle is fitted with dual controls so therefore would be eligible for AIA - I just checked the documents for the vehicle.
That said, after Income and allowable expenses there will be a loss so its whether it makes sense to use AIA or whether to go down the route of Capital Allowances. It wouldn't make sense to show a huge loss especially given they are hoping to look get a mortgage in the coming years.
EDIT - I should have said, in the next year she wont make enough profit to make up for the large loss.
Think "balancing allowance"
I understanding a balancing allowance will be deducted from profits but what I'm unclear of is how to calculate the value of the "sale" for the returned vehicle.
Am I correct in thinking this would be the value of the monthly payments unpaid at the time the vehicle was returned (minus interest etc).
Sorry if this sounds stupid.
When an asset under HP is returned with an outstanding liability (which liability is foregone by the finance company) that liability is generally taken to be the sale proceeds.
Did you understand my point about balancing allowances (and trips to the shops)?
Yes, by putting through even a small amount of personal use it will go into a single asset pool meaning the balance remaining can be claimed as capital allowances after disposal. Rather than a proportion of the balance if it was in the main pool.
Correct me if I'm missing your point.
Understated private use might make HMRC wonder if there was any underdeclared income.
Your client needs to keep good records of mileage.
I had wondered this myself (I find it very hard to believe there wasn't any at all).
She did say "I just use it for work" but I'm sure she'd have nipped to a shop or something so I would be hesitant no to put any through anyway.
Well, she needs to think that a typical lesson might do 20 miles. If she's done 20000 miles in the car over the year and it's all business, HMRC will be looking for 1000 fees.
Point that out and the private motoring will be flooding out of the woodwork.
Just a further note on this case:
Usually when an asset is owned before the business started to operate then the market value of the asset is entered into a pool rather than the cost.
My client entered the HP in June whilst training but did not start trading until November. I assume then that the same applies? Rather than the vehicle cost in the HP agreement the market value of the vehicle as at November would be used.
This is going back to 2015 - is there an accurate way of calculating the market value as at November 2015 or is it simply the value of the original HP minus the 6 installments given that this would be the value of the vehicle was returned?