Tax Question/one For Accountants

[jamesy boy]

A mobile chiropodist (not VAT registered) drives a big 4x4. She is going to get a smaller, more economical car and sell the 4x4. Can she claim anything back from the purchase of the smaller car?
I don't think she would be able to, am I right?

[BRIGHT SPARK]

Generally,but dependent on personal circumstances she could offset 25% of the price she pays against tax for the first 3 years.(reduced in year 2 and 3). In some cases it can be offset 100% in year 1..but if she sells before year 3 the allowance will be adjusted.How much did she claim for the 4x4?

[jamesy boy]

She hasn't sold it yet.

[BRIGHT SPARK]

Has she claimed any tax against the 4x4?...you can offset tax from the date of purchase.

[LittleSquidge]

http://www.hmrc.gov.uk/vat/managing/reclaiming/motoring.htm

You cannot reclaim VAT unless your business is car specific, a taxi driver, etc.

[Skyline D]

You cannot reclaim VAT on a car unless your business is the car and it has no private use (dedicated taxi / car rentals, etc) but that's not the issue here since the chiropodist is not vat registered.

If you use your own car in running a business you are entitled to claim the expenses of running it (fuel, insurance, servicing, etc) as a business expense though there should be a disallowed percentage for any private use. So if for instance half the mileage is business and half personal then 50% of the running costs would be allowed.

Likewise, you can claim the cost of the car as a capital payment and claim capital allowances on it at 25% per annum on a reducing basis as a deduction against tax. Again though, if it's half used for personal use then you'd only get half the allowances or whatever percentage was appropriate.

The size of the car is unimportant. Your chiropodist will get the appropriate percentage of costs (capital and running) of either car allowed as a business expense. It's up to her to decide which car she wants (or can afford) to run.

[jamesy boy]

Cheers

[1eyedjack]

The rate of capital allowances is either 100%, 18%, or 8% (before private use adjustment), depending on the rate of C02 emissions. It hasn’t been 25% for a few years (it was 20% for a bit). Alternatively the taxpayer can claim 45p per business mile for the first 10K business miles per year, 25p per mile on excess, instead of capital allowances and all running costs (petrol, RFL, servicing, MOT, insurance) except for the business proportion of finance costs (if financed). Finance costs in addition to milage rate are available only to self employed, not employees. Milage rate for self employed only available to businesses with sales below VAT reg which I gather this is.
There is also a completely new alternative system available for simplified accounting introduced since Apr 2013 allowing for flat rate expense claims and cash basis. Not beneficial for most but as well to be aware.