Qualifying Hire Cars and Capital Allowances

I started a chauffer business last year, and work has recently picked up to such an extent that I am now looking to employee my son as driver and purchase another vehicle. I am looking to purchase a new vehicle for a “on the road price” of £18,000. How is the cost dealt with for tax purposes?

1st April 2009

The total cost of the vehicle will qualify for Plant & Machinery Capital Allowances, but as it is a “qualifying hire car” you should consider purchasing the vehicle before 6th April 2009, as there are some changes affectign these types of vehciles that will reduce the capital allowance that you can claim. 

Prior to April 2009, assuming your accounting period is 12 months, the vehicle purchase will qualify for deduction in full because you can deduct 100% of the first £50,000 spent on plant and machinery under the new Capital Allowance Annual Investment Allowance (AIA) introduced in April 2008. 

This can be claimed whether or not the vechicle is new or second-hand, purchased outright, or is financed via loan or hire purchase agreement. If your accounting period is less than 12 months, the £50,000 AIA is proportionatley reduced and if the value of purchases qualifying for the AIA exceeds the threshold, you are only entitled to standard Writing Down Allowances (WDA) at 20% per annum.

A “qualifying hire car” is 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 by the HMRC legislation. Your local TaxAssist accountant will be able to provide you with further details on this.

By Jo Nockels

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