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#1 27-11-06 23:31:16

PiperIan
Verified Member
From: Renfrewshire
Registered: 18-06-05
Posts: 768
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Training car and the tax people

I find this subject very confusing  yikes
As an Indy...I purchased my own car for my one man band school but I am very confused about where I stand with Mr tax Man.
I use my car only for training purposes as I am in the fortunate position of using my wife's car for all our private running around.  I did start recording my weekly mileage but didn't see the point when every mile is down to the business.
With regards to the cost of the car, I am very confused as to what to declare at the end of the tax year.  I hear things about 50% tax relief etc etc.
Can anyone give me good advice as to how I should enter the car expense in my next (first) tax return ?


I'll never forget Wotzizname !!!

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27-11-06 23:31:16

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Re: Training car and the tax people



#2 27-11-06 23:44:55

Karenadi
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Re: Training car and the tax people

Firstly, I'd recommend an accountant: it's safer and easier than doing it yourself.

Re the car: You can claim the full purchase price of the car in the first year against tax.  If you have a loan/hp, you can claim the INTEREST on that loan for as long as you have it.

In the second year, you can claim depreciation on the price of the car: I think it might be 50% but I'm not sure.  In the third  and forth years, there is further depreciation, at which point, as far as the tax man is concerned your car is worthless, but clearly it will have a residual value as an asset.

If you only use your car for business, then every receipt to do with the car must be kept, and counted as a business expense: that includes fuel, servicing, breakdown cover, insurance, tyres, car wash etc etc. 

I use my car for minimal private matters: ie going to Asda for shopping, but then I'm on my way home from work anyway, and usually passing.  My accountant thinks this mileage negligable, and so I claim all my car expenses across the board.

Hope that's helpful, and I'm sure others will fill you in further.

#3 27-11-06 23:46:56

Karenadi
Guest

Re: Training car and the tax people

I can see you again Dimmy. :evil:

#4 28-11-06 09:01:50

jr
Verified Member
Registered: 29-10-05
Posts: 79

Re: Training car and the tax people

If you own the car (not leased) then for most people the most tax efficient way to claim tax relief is to  claim mileage. The first 10,000 miles is claimed at 40p per mile and the remainder at 25p.

You don,t claim for any running costs of the car or depreciation.

The way to find out which is best for you is tot up all your running costs, depreciation, fuel, insurance, servicing, repairs etc. Then work out how much you would claim on your yearly mileage.


If you do 30,000 miles per year you would claim £9,000.00  My accounts are done by an accountant and this is how mine have been done for several years. You can't change from one to the other each year. If you are not claiming this way at the moment you will only be able to change to mileage in the year you change your car.

Whichever way you use a percentage will be deducted for private use and for the small amount involved its not worth the hassle from the tax man.

John

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#5 28-11-06 14:22:46

sue martin
Verified Member
From: National area franchises
Registered: 21-01-05
Posts: 333
Website

Re: Training car and the tax people

Just jumping in here....

you cannot unfortunately claim the purchase value of your school car in your first year as it is deemed a capital purchase ie it still has a value after your purchase ( think in terms of whether an item will be able to be sold again at the end of your usage)
what happens with tax claims are first up all the interest portion of your monthly repayments if you have a loan for the vehicle are seen as expenses and can be claimed for, then each year the car is deemed to be worth less and the difference between what you paid originally and what the car is now deemed to be worth is offset against tax, this is call Capital Writedown, if you have bought a brand new car the amount is 50% the first year and 25% each year after ie if you paid £10000 after one year it is deemed to be worth 50% less ie £5000, another year later is 25 % less ie £3750 etc. if the car was not purchase brand new the first years Capital Writedown is 40 %, all sounds a bit confusing but is actually dead easy once you get your head round it....
Now selling!...thats another matter!!

Sue


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#6 28-11-06 17:21:51

PiperIan
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From: Renfrewshire
Registered: 18-06-05
Posts: 768
Website

Re: Training car and the tax people

All very confusing...But thanks for jumping in Sue, your explanation seems to suit my personal circumstances.
Thanks also to jr, dimmy and karenadi for taking the time to reply with good advice.  This site never fails to astound me with the great advice passed around by everyone in the industry.

Ian


I'll never forget Wotzizname !!!

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#7 28-11-06 17:41:45

Karenadi
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Re: Training car and the tax people

Yes, but, the amount I pay out: ie cash when I first buy the car is tax deductable, simply because I haven't got that cash anymore.  Its gone.


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#8 28-11-06 17:57:22

sue martin
Verified Member
From: National area franchises
Registered: 21-01-05
Posts: 333
Website

Re: Training car and the tax people

Yes, but, the amount I pay out: ie cash when I first buy the car is tax deductable, simply because I haven't got that cash anymore.  Its gone.

[quote author=Karenadi

Hi Karen,

well done to your accountant if they have managed to get this thro , unfortunately all the tax inspectors l have ever met have insisted on all Capital Write downs being listed on the yearly percentage only ,hence the value of the car never disappears totally but this is compensated upon selling the car again on the sold value V perceived value writeoff .
Sue


0800 298 8928
http://thebrightredl.com
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#9 28-11-06 20:06:30

glennm
Verified Member
Registered: 04-05-06
Posts: 52

Re: Training car and the tax people

The point is Karen that although as you say the cash has gone your business now has an  asset that is equal to the cash you spent.

In other words you stil have that money just invested in the car which you could sell at any time and recoup your money.

The taxman allows for the the fact that this asset will reduce in value and that is why the capitol allowances apply.

For other business the allowance on a car is 25% each year.

For Driving instructors  the allowance is 40% in the first year and 25% in subsequent years.


Glenn




Confucius said: Real knowledge...... is to know the depth of your ignorance.

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#10 28-11-06 20:29:09

Carl
Guest

Re: Training car and the tax people

When I first started I had a chat with the tax man about car costs. The person I spoke to at the time said that I could claim the full cost in the period in which I bought the car BUT I could not do any form of capital writedown for the lifetime of the car. If I then sold the car I would have to include the sale value in my taxable income.

Personally, for the last 8 years, I've used the 25% writedown each year and adjusted the value when I've sold/trading in the cars. I did have the figures checked by an accountant a few years back, just to make sure I was doing it right, and she said that it was spot-on.

What I do each month is record the starting mileage. Then record the mileage for each lesson I do in the month, including travelling to and from the lesson, and then record the mileage at the end of the month. That way I have accurate figures to the total mileage and business mileage. I can then work out the costs based on the percentages. My wife thinks I'm made but I've worked the system since day one and it works. Now I've written a little program for my PDA to record mileages so no more writing and keying it in to a spreadsheet.

I'm currently working on developing a driving school program (codename Teachers Pet) which will include vehicle management and a way to manage costs involved. It should make working out the figures for a driving instructor really easy. I'm fed up having spreadsheets for this, that and the other so I'm trying to put it all together in a nice little program (that I intend to market!!). Hopefully, version 2 will include an accounts add-on that will help with self-assessment too.

Carl

#11 28-11-06 20:47:38

Karenadi
Guest

Re: Training car and the tax people

Have you ever tried to sell a car for the same price you paid for it?  It's not happening: lose £2000 as soon as you drive it off the forecourt.


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#12 29-11-06 12:56:24

sue martin
Verified Member
From: National area franchises
Registered: 21-01-05
Posts: 333
Website

Re: Training car and the tax people

Have you ever tried to sell a car for the same price you paid for it?  It's not happening: lose £2000 as soon as you drive it off the forecourt.

but l think actually karen this is the whole point, you loose money after you purchase so claim depreciation as a capital writedown but you still have the asset as Glenn stated, if when you sell the perceived value and the actual hard cash you sold it for differ then that is claimed as a re adjustment also so you don't loose out, if you claim for the purchase price of the car then the depreciation of it you are in effect claiming for the same thing twice and the tax man doesn't like that!
Sue


0800 298 8928
http://thebrightredl.com
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#13 29-11-06 15:52:17

Karenadi
Guest

Re: Training car and the tax people

Gotcha: right.  Will check this out with the accountant.  There was me hoping the tax man was going to owe me money this year too. sad sad

#14 30-11-06 19:59:33

hector
Verified Member
From: Manchester
Registered: 04-04-06
Posts: 2,097
Website

Re: Training car and the tax people

Hi Ian
pretty sure this is correct, Sue will correct if its wrong!

Max depreciation on a vehicle 3 grand a year.

You can also claim for 'loss on sale' of your previous vehicle.

My last years claim was as follows

£5500.00 fuel  and vehicle expenses ( 100% claim)
£2300.00 depreciation
£1800.00 loss on sale

I covered about 33,000 miles. So virtually identical to the figures for pence per mile.


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#15 30-11-06 21:16:56

glennm
Verified Member
Registered: 04-05-06
Posts: 52

Re: Training car and the tax people

According to an accountant friend of mine if you buy a new car with co2 emissions less than 120gm/km you can claim 100% allowance in the first year and the £3000 limit does not apply!

Some of the samll engine petrols and most small engine deisels (fiesta/corsa) fall into this group.

Apparently its to encourage businesses to buy greener cars.

Not sure if this is true.....but the inland rev site seems to agree with this.

Glenn 


Confucius said: Real knowledge...... is to know the depth of your ignorance.

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#16 30-11-06 21:22:41

Karenadi
Guest

Re: Training car and the tax people

That's good news: mines 1.3 cdti

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