Sole Trader - Car Finance

NATASHA1

A really stupid question but I am unable to think of the answer.

I have a new sole trader client who purchased a car through an advance purchase plan which has now ended with a remaining balance of £18,211.00. He has decided to pay in full for the outstanding balance from his personal account. He has also been claiming capital allowances for this vehicle with a wdv of £37,357. He uses the vehicle 25% of the time for private use.

I would be very grateful if someone could tell me how I account for this expenditure of £18,211.00 to purchase the car outright in his accounts and also do I continue to write down the vehicle yearly at 20% (restricted to a max of £3,000 less £750 private use) or a suitable alternative bearing in mind he is not selling the car.

Thank you very much

T.C.

As he is not selling the car, you would continue with the capital allowances as you have been. You will simply put in the payment as a capital introduction to the business in order to pay off the finance. Does that make sense?