Assuming cars sold at a profit, these ongoing annual maintenance costs should be carried forward in tax computation and will either be relievable against the profit if argued as trading, or will reduce a capital gain if accepted as not trading, albeit the gain falls within the S263 exemption. Would you agree?
Ah, I understand your comment about the exemption in s263 relating to taxi cabs, racing cars, single seat sports cars etc. I will confirm my client's cars are "normal motor cars". If so, and if sold at a profit, there will be no CT payable on the gain?
Thanks for your reply Vile. So you are saying (a) this is not a trading activity and therefore the periodic maintenance costs cannot be offset as an expense, and (b) neither can they be used to offset a chargeable gain or increase a chargeable loss. So they are added back in the tax computation as disallowable expenses?Can you clarify the tax treatment if the cars are sold at a profit? Is the gain covered by the exemption in TCGA 1992, s 263? Many thanks for your advice on this, it is much appreciated.
Have found a previous post that says “cars are exempt from CGT, but not because they are wasting assets - it's because they are a private motor vehicle and specifically exempt (s263 TGCA). If the exemption was because they were wasting assets then they could become chargeable if capital allowances were or could have been claimed”. Therefore, my client realises a gain on selling the cars then the gain is exempt from tax in any case? Would appreciate any thoughts on this and the treatment of the annual maintenance costs.
I hadn't considered this to be a trading activity as the assets (cars in this case) are being held for capital appreciation. They are currently held on the balance sheet as investments.
Yes, I can see that works, thanks. The dividend is the same either way. A further thought, if the pension contributions were made from NET pay (like some workplace pensions do)then they would be relevant in this scenario and should be included on the SA tax return (box 1 on page TR4) - the effect would be to extend the basic rate limit and hence increase the dividends available at 7.5%. Correct?
Yes, payslip shows that tax is calculated on gross pay less pension contributions. So the employee pension contributions into the NHS scheme are irrelevant for SA tax return purposes, and the maximum dividends to stay at 7.5% for 2018/19 are calculated as £46,350-taxable pay?
Thanks everyone. I'll not read the guidance that isn't there!!
Thanks. Can you point me to some HMRC guidance to confirm?
No income generated. However, if it increased in value over the year, is this a chargeable gain on which the company pays corporation tax?