Car purchase loans and Form-11

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geordief

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I am trying to find on the Form-11 form where I can claim for a car loan against any tax I could be liable for.I can see a field where you are asked to enter your borrowings.
Is that where I start?
I am completing a return for one year and the car purchase loan is spread over 5 years.
Should I just enter the yearly repayment amount as an unspecified expense?
 
Can I ask, why do you think a car purchase loan would be a tax deductible expense?
 
Is it a HP agreement , a loan or a lease?
Is the car used 100% for work --- no personal use
 
it is a HP.I also use it for personal use but I could not carry on the business without it.
I seem to remember (30 years ago) my mother had to get a metal panel inserted into the window frame for the back seats to qualify her saloon as a suitable for business.
I have changed cars since and not paid attention to that detail.
Was that important?
By the way what about when the bank charges you interest when you go overdrawn?Does that count as expenses? And just ordinary bank fees?
 
Im open to correction here but

i think that an asset acquired under Hire Purchase needs to be capitalised and claimed against tax by claiming capital allowances over 8 years
any interest in the monthly payment is claimed as it is paid

you should really dissallow a % for private use

at a guess I would say that your mother inserted to panels to convert the car to a commercial vehicle so that VAT could be reclaimed & lower motor tax possibly

I assume the car is insured as a business vehicle
 
geordief said:
it is a HP.I also use it for personal use but I could not carry on the business without it.
I seem to remember (30 years ago) my mother had to get a metal panel inserted into the window frame for the back seats to qualify her saloon as a suitable for business.
I have changed cars since and not paid attention to that detail.
Was that important?
By the way what about when the bank charges you interest when you go overdrawn?Does that count as expenses? And just ordinary bank fees?
Click to expand...

Where to start...

Firstly, you are entitled to a deduction for expenses that have been incurred wholly and exclusively for the purposes of the trade.

Expenses:
The actual repayment of a loan is never an expense; the expense, if any, is the cost of the borrowing, which is the interest. Also, depending on the type of finance (bank loan, HP, or Lease) the tax & accounting treatment varies. In your case, a HP agreement, it is normal to calculate the interest on "the sum of the digits" basis, but if you're only talking about a small amount, it won't make much difference if you just divide the total amount of HP interest over the term of the HP, by the number of months / years...

Wholly and exclusively:
You are only entitled to claim a deduction for any expense, to the extent that it relates to business usage. In the case of the car, having established that the expense is the HP interest, the next question is how much of the interest relates to the business usage of the car, i.e. 1/3 personal use and 2/3 business use would mean you could claim 2/3 of the interest.

Capital allowances:
The main deduction that you'll get for the cost of the car (or any asset) is capital allowances. This means that the cost of the asset is written off over 8 years (12.5% p.a.). This is not claimed in your accounts as an expense reducing profits, but in the capital allowances section of the Form 11.
Again, you can only claim the portion that relates to business usage, in the same proportion as you do for the HP interest.

As for the overdrawn charges and bank fees, is it a business bank account? i.e. would you still have incurred these fees on this account if you weren't operating the business... if so then it isn't a business expense strictly speaking. But in reality everyone just claims them AFAIK!

At the end of the day, if the above is not making sense to you, you shouldn't really be doing your own tax return, this sort of stuff is just not everyone's cup of tea, hence the existence of a profession to do this work..!
 
mandelbrot said:
Capital allowances:
The main deduction that you'll get for the cost of the car (or any asset) is capital allowances. This means that the cost of the asset is written off over 8 years (12.5% p.a.). This is not claimed in your accounts as an expense reducing profits, but in the capital allowances section of the Form 11.
Click to expand...
Is that in the Capital Gains section?
I can't see anything there that relates to acquisitions.Or it it the field (within the Capital Gains section) called Chargeable Gain/s ?
 
sorry that makes no sense to me (B109).

I have ,however , now found the Capital Allowances section in the Self Employed Income section of Form-11.

If the hire purchase agreement lasts 5 years does this mean I can only claim 5/8ths of the annual annual repayment (to allow for the apparent fact that the capital allowance is assessed over a 8 year period.)

I mean ,if I am repaying 10000 over a 5 year period (so 2000 a year) can I only claim 1250 per year (but for 8 years instead of 5) ?
On top of that do I have to estimate the percentage of the vehicle that is for personal use versus business use? (even though I could argue that it was 100% essential for the business in the first place)

I do very much enjoy figures and calculations normally but this is beginning to do my head in as they say.. though not as much as paying the accountant's fees as well as doing a lot of the legwork for him (when I had him)
 
Your HP loan is made up of the asset value and the interst say 8000 + 2000 = 10000

Your capital allowances are 8000 / 8 = 1000 per year - (Reduced by whatever % is personal use)

The interest paid is an expense and reduces your taxable profit by 400 (2000/5) (Reduced by whatever % is personal use)

( B 109 was the section of the return that the capital allowances are in)
 
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thanks
that was very clear and concise! (the separate accounting periods are a little strange to my well ordered existence but on the day they are supposed to have discovered faster than light particles , anything goes I suppose)
 
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