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Private Hire Vehicles

I have started a taxi business aiming at the executive market this month. I have purchased a new vehicle for a total cost of £50,000 that is exclusively used in the business on the same date. How is the cost dealt with for tax purposes?

The total cost of the vehicle will qualify for Capital Allowances, and assuming it is a qualifying hire car it will qualify as Plant and Machinery. Up until April 2008 First Year Allowances were available on the cost of the vehicle in the period the vehicle is acquired. As the vehicle was acquired after April 2008 it will qualify under the new Capital Allowance system, in which small business are entitled to Annual Investment Allowance.

This will effectively allow businesses to claim relief in full for up to £50,000 Plant & Machinery assets acquired in the year. The annual investment allowance however, does not apply to cars, so we would recommend you speak to your accountant to confirm if the definition of a qualifying hire car pre April 2008 (a car 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 the three conditions outlined on the HMRC website) is still relevant to the new system.

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