Motor vehicle cap allowances/trade in

Janej Registered Posts: 50 ? ? ?
Hi everyone
I think I am getting myself a bit confused here. My new client is a sole trader, private hire driver. Accounting period Aug - July. He has been claiming capital allowances on his vehicle and decided to trade it in Nov and received £4000 against his new vehicle which he used in his business. He then decided in March the following year to hand in his private hire licence so he was no longer able to claim for the new vehicle as he no longer uses it in the business.. He is still trading as he employs drivers who use their own vehicles to fulfil his contracts.
Am I better to treat the original vehicle as if it was sold for £4000 and then just use mileage allowance for the period Nov - March and if so do I use the £4000 as the proceeds and write this back or do I use the NBV or the WDV ?? I think I am having a bit of a blonde moment with this one.
Thanks for your help


  • douglasstroud
    douglasstroud Registered Posts: 295 Dedicated contributor ? ? ?
    Difficult to comment on what will be the most tax efficient way of dealing with the new car without all the details of the business but if you do it the way you are suggesting then I would say that the £4k would be the disposal proceeds which you would then subtract from the WDV of whichever pool the car is in, but be mindful that if the car is in either the general or special rate pool then a balancing allowance can only arise on the cessation of trade.
  • Janej
    Janej Registered Posts: 50 ? ? ?
    Thanks for your reply douglasstroud.
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