Invoice Value & Tax Liability

Invoice Value & Tax Liability

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Smiler.

Original Poster:

11,752 posts

236 months

Friday 26th February 2010
quotequote all
A sole trader buys a company new car.

Base OTR price = £25K

Options = £4K
5 yr Service Plan = £1K


CO² = 171g/kg
VED = H (£175)


Does it make any difference to the projected tax payable (based on the current rules) over 5 years if:

a. The base OTR price is on the invoice & the options & service plan are paid separately.
b. The options & service plan cost are included in the OTR price.
c. Only the service plan cost is added to the base OTR price with options paid for separately.

Thanks in advance.





Eric Mc

122,685 posts

271 months

Friday 26th February 2010
quotequote all
What are the Options you refer to?

Smiler.

Original Poster:

11,752 posts

236 months

Friday 26th February 2010
quotequote all
Eric Mc said:
What are the Options you refer to?
Mats
Boot tray
Side protectors
Colour coded bumpers
19" alloys

Ta.

Eric Mc

122,685 posts

271 months

Friday 26th February 2010
quotequote all
When a sole-trader "buys" a vehicle for his business, he is allowed claim Capuital Allowances based on the actual purchase cost of the vehicle. That purchase cost incudes the basic cost of the vehicle PLUS any accessories bought AT THE TIME THE VEHICLE WAS PURCHASED.

So, if you are buying a £35,000 car with £5,000 accessories, the cost for Capital Allowances purposes is set at £40,000.

The Capital Allowances claimable are based on the CO2 rating of the car. Cars with a rating of 160g/km or lower are eligible for an annual claim of 20%. Cars with a g/km of over 160 are claimable at 10%.

If the car is also used for private journeys, which is usually the case with sole traders, then the claim being made (whether at 10% or 20%) will be restricted by the Private Use Fraction or Private Use Percentage. This is usually based on the business mileage in the year taken as a fraction or percentage of the total mileage.

For the purpose of Capital Allowances, a car is a "bought" car if it has been

bought outright by cash or cheque/bank payment
finnaced by an ordinary bank loan
financed by a HP agreement

It is NOT bought if it is financed by -

a lease hire arrangement
a finance lease
a rental agreement

In these cases, different tax rules and a different tax treatment applies.

Smiler.

Original Poster:

11,752 posts

236 months

Friday 26th February 2010
quotequote all
Cheers Eric smile