Your Richmond Accountants discuss Capital Allowance on company cars

After our last blog on the most tax efficient car for you and your company, Harnett Accountants in Richmond, have received an email enquiry from one of our clients about Capital Allowances his company can receive from trading in his car for a cheaper model. This was a very good point and one we shall demonstrate below using his case as reference.

Our client’s company brought a second hand Mercedes AMG for £68,000. The Mercedes AMG has CO2 emissions of more than 160g/km so the purchase price would have been added to the company’s 10% capital allowances pool; creating a Capital allowance of £6,800 to be claimed in the first year of ownership. The trade value of our client’s car is estimated at £40,000 with an additional £5000 for his new vehicle; leaving a balance of £21,200 (£61,200 -£40,000). This balance will be reduced by capital allowances of 8% from 1 April 2012, until the balance is less than £1,000 or company ceases to trade.
So unfortunately it’s going to take a long time for our client and his company to get full tax relief for the value of the Mercedes. Furthermore, if our client’s new car also has CO2 emissions of 160g/km or more, the cost of £45,000 will be added to the 10% pool, and annual writing down allowances will be given as for the Mercedes.

To avoid this problem, your favourite Accountants in Richmond suggested that he should look into buying his new car privately, or getting his company to lease it. Especially with the new VAT scale charges for fuel used in private journeys on company cars which is soon coming into effect – so keep watching this space.

If you have any questions about your accounts, book-keeping or company cars then don’t be afraid to ask, we are always willing to help. Additionally, keep following our daily blogs or add us on Facebook or Twitter.

HarnettAccountants in Twickenham, Teddington, throughout the Richmond borough and West London, we’d like to wish her majesty Queen Elizabeth II a very happy Jubilee celebration.


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