AIA and finance leases

sianadams

I am after some clarification. I've read so many contradictions I'm not sure what to believe. My client has bought a van for his business. At the moment he cannot tell me if it's HP agreement but seems to think its his at the end of the period with the option to buy. Can I capitalise it now (for tax purposes)? Or is ownership still with the lessor and they're claiming the capital allowances for it?

CeeJaySix

Yes you can capitalise cost for CA if it's HP - a quick Google confirms with HMRC guidance here: http://www.hmrc.gov.uk/capital-allowances/plant.htm states you can claim CA as normal on the cost only (ie. not the finance charges).

KernowAccountant

CeeJaySix wrote: »

Yes you can capitalise cost for CA if it's HP - a quick Google confirms: PIM3005 states capital allowances may be available on fixed assets held on HP. I assume the 'may be' relates to whether the asset is normally eligible for CA. HMRC guidance here: http://www.hmrc.gov.uk/capital-allowances/plant.htm states you can claim CA as normal on the cost only (ie. not the finance charges).

You realise that "PIM" stands for "Property Income Manual", right? Are you sure the OP's question relates to property income?

KernowAccountant

I would suggest the OP digests HMRC's Business Leasing Manual here: http://www.hmrc.gov.uk/MANUALS/blmmanual/Index.htm in conjunction with the Capital Allowances Manual from CA23300 onwards, here: http://www.hmrc.gov.uk/Manuals/camanual/CA23300.htm

CeeJaySix

My apologies, no I did not; I have edited my post to avoid confusion. Thank you for the correction.