Capital Allowances for Taxis

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in General accounting discussion
Capital Allowances seem to draw a blank for me! Can anyone advise me on these...


1) new taxi driver buying a cab for £50k. Getting loan which he is repaying at £250 per week for 5years. What is the rules on allowances? would he claim a FYA and then capital allowances on WDV, even though he has not paid for it yet? and what about the interest? could that be included in P & L as an expense, or is that only allowed on HP?

2) Someone newly self employed on 01/12/06 already owned a car for 4years. Now uses is 80% for business use. How do I handle capital allowances? can he claim FYA on current value or would it be based on a WDV?

Any advice would be extreamly appreciated please! :?

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Capital Allowances for Taxis

    1) £50k for a cab?! is it gold plated or something? :lol:
    you're right though, he can claim a FYA on the cost of the vehicle and then the usual WDA in future years. As it's a commercial vehicle I don't think that you'd have to cap the allowance at £3k (someone please confirm).
    The loan interest will be accounted for the same was as any other loan, just post the interest to the P&L account.

    2) You can't claim FYA on this car for 2 reasons. a) because the asset was pre-owned before being used for the business, and b) because it's a car and the only cars that I know of that attract FYAs are taxis and driving instructor's cars. So you'll just find out the open market value as at 1 Dec 06, write it down at 25% and then claim 80% of that amount on the tax return. Remember that if you're drawing up accounts to 31 March and he only started on 1 Dec, then the WDA is time-apportioned, whereas the FYA in the first example can be claimed in full regardless of the length of hte accounting period.

    jodie
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Capital Allowances for Taxis

    Regarding the taxi (Jodie's point 1). I am assuming it is a "black cab". A very expensive one it would seem!

    Jodie is correct.

    Vehicles such as these are not caught under the rules governing cars as they are not primarily used as a private vehicle and as such are not caught under the (very large) umbrella of HMRC's definition of vehicles containing an element of "private use". They are bought with the intention of undertaking a trade - i.e. taxi driver. First year allowances can therefore be claimed.

    I doubt (for £50k) it would be a normal vehicle which would be used for a taxi (unless it is a 2nd hand Aston martin of course). Normal vehicles purchased for use as a taxi would not attract FYAs.

    Best regards
    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Capital Allowances for Taxis

    Thanks Jodie and Steve for your replies...

    I cant believe that I put down 50K for a cab! this is what I was told, but as I havn't taken this account on yet, I didnt CLICK when he said 50K! you are right Jodie, it must be gold plated! didnt know cabbies earned that much!! HA HA!

    Thanks for your help - as always!

    edwina :D
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Capital Allowances for Taxis

    Steve, this has got me worried now:-
    Normal vehicles purchased for use as a taxi would not attract FYAs.

    I've got several clients who've purchased 'normal' cars and use them as taxis and I've claimed FYAs on them. I've gone back to the HMRC's guidance manuals and found this:-

    http://www.hmrc.gov.uk/manuals/camanual/CA23510.htm

    The cars legislation does not apply to qualifying hire cars. A qualifying hire car is a car that is provided wholly or mainly for hire to, or the carriage of, members of the public in the ordinary course of a trade, and satisfies one of these three conditions:

    1, It is not normally hired to, or used for the carriage of, the same person for:

    30 or more consecutive days, or
    90 or more days in total in any 12-month period.


    When you said that normal vehicles (used as taxis)don't attract FYA allowances did you mean that this applies when they were used personally by the taxi driver before he used the car in his business?
    If you did mean that FYA can only ever be claimed against black cabs (& the like) I'd be very grateful if you could point me to some legislation of sorts to back it up.

    thanks
    :?
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Capital Allowances for Taxis

    I cannot be 100% sure but I think it is section 46 that clarifies the situation for you.

    I had a similar situation a few years ago with a taxi driver. My belief is that where taxis are of the type of vehicle which are commonly used as a private vehicle then despite the fact that they are used as a "qualifying hire vehicle" they are excluded from first year allowances as they are essentially cars.

    My experience, however, would suggest that in an individual case you would probably be better seeking clearance from an Inspector at HMRC as sometimes interpretation of legislation is not always black and white.

    Best regards
    Steve

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