Van - capital allowances - HELP!

kellyp

Hi,

I have got a new client who bought a van during the tax year 2010/2011 for £3800.
He says he uses it mostly for business though I worked out his business miles to be 38%. He didnt keep a record of his personal miles so I have worked out the business miles based on customers he invoiced and quotes etc.

Firstly, is he eligible to claim capital allowances as there I no proof that the van is mainly used for business purposes?

Secondly, if he can claim capital allowances, do vans with part private use still fall into the AIA catergory?
Would the calculation be: £3800 x 38% (business use) = £1444.

Thanks in advance.
Kelly

T.C.

Vans are generally considered as all business use. Is there really a reason for private use, ie his only vehicle?

kellyp

he just owns the one vehicle which is the van.

T.C.

If there is no other vehicle available for his use, then perhaps it is wise to put in a little personal use. What is his business?

Anne Boleyn

Van exp

Hi Kelly

I assume you had the starting and ending mileage to be able to work out the percentage? Have you spoken to your client and told him about the 38% figure? If he says that he uses it mostly for business then maybe he makes lots of trips to suppliers or quoting for jobs that haven't turned into customers and you wouldn't be able to know this unless he recorded them. If he only has one vehicle I would be looking to include some personal use. I would speak to your client, he might consider 38% is fair or think it closer to say 80%. Try to work out with him what is missing from your "mileage record" and go from there.

Hope this helps.

kellyp

Hi, thanks for the responses.
Yes I had a start and end mileage figure from my client. He is a plumber.
so would the calculation for the capital allowances just be 3800 * 80% ?

thanks

T.C.

Yes, talk to your client. I would agree that a figure closer to 80-90% is more appropriate. I would be more inclined to lean towards the 90%. The capital allowances figure to use would be.
£3,800 x 20% (CA) = £760 x 90% business use = £685
Balance to carry forward £3,800 - £760 = £3,040
Have you suggested Annual Investment Allowance instead with its pros and cons?

Hope that makes sense to you.

kellyp

I thought the whole amount less the personal portion (i.e. 10 or 20% as suggested) would be allowable using the AIA?!
It does make sense to me although im not really sure of the pros and cons of the AIA. I don't think this was mentioned during my AAT studies...eek! would you mind briefly explaining? thanks for your help.

Anne Boleyn

Capital Allowances

Hi KellyP

A van is plant & machinery and therefore AIA is claimable. You would apportion according to the business/private percentage. If the profit is quite low you don't have to claim the total amount but restrict it to whatever amount is beneficial.

The AIA is 100% tax relief on plant & machinery (assuming 100% business use) upto the limit £100K I think. One drawback with using the AIA is if your client knows he going to sell the van next year, he has already received tax relief on the whole amount and therefore he'll have to pay tax on the value received.

Whereas other assets purchased for the business might only attract a writing down allowance (WDA) of 20% (18% from April 2012) or 10% for integral features and certain other pools. Again the amount claimed is apportioned according to private/business use and can also be restricted if beneficial.

Hope this helps.

T.C.

Yes, I agree with Anne Boleyn. Your client needs to consider the implications of using his AIA. I tend to advise CAs for this type of plant. You need to advise because deciding upon an option.

kellyp

Hi, thank you for your help!! seems much clearer now

deanshepherd

If AIA is available I take it. I'm not one for giving HMRC any more than they need.

PGM

Wouldn't it work out better to claim the 45p per mile rather than the capital allowances?