FY Capital Allowance on a Car

[jbs1]

I've got a business that started trading on 1st Oct 2010, I am going to prepare accounts for the 6 months to 31st Mar 2011 and submit these in the 2010/11 self assessment return. Going forward I will then adopt a 31st March year end to keep things simple.

A used vehicle was purchased in Feb 2011 for £7539, the vehicle is used 80% business and 20% personal
£7539 x 50% = £3769.50 FY allowance
£3769.50 x 6/12 = £1884.75 FY allowance adjusted for short 6 month accounting period
£1884.75 x 80% = £1507.80 FY allowance adjusted for business usage

Q1) Is my calculation above correct?
Q2) Could I potentially be better off claiming mileage allowance & finance charges, but then there’s the issue of maintaining all the mileage records.
Q3) Could I instead choose to prepare accounts with a 30th September 2011 year end, therefore not include any business profits in the 2010/11 return. Then submit the profit in the 2011/12 return?

Advice appreciated

[pjclar02]

Q1) Is my calculation above correct?

I'm afraid not - the 50% first year allowance disappeared a few years ago, and even then was not adjusted for short periods. Capital allowances for cars are now based on the CO2 emissions.

Q2) Could I potentially be better off claiming mileage allowance & finance charges, but then there’s the issue of maintaining all the mileage records.

Potentially. It depends on what the running costs are likely to be in terms of actual fuel costs, insurance and repair bills. You will have to do the maths to work out which is the better route. You would have to keep some kind of mileage record either way, in order to justify your 80:20 split.

Q3) Could I instead choose to prepare accounts with a 30th September 2011 year end, therefore not include any business profits in the 2010/11 return. Then submit the profit in the 2011/12 return?

You could choose a year end of 30 September 2011, however your first basis period would still be from 1 October 2010 to 5 April 2011, so you would still need to submit a 2010/11 return.

I would advise you speak with an accountant about some of these issues - the last one particularly, as there may be tax advantages in picking a certain year end over another.

Hope this is of some help.

[jbs1]

Thanks pjclar02, your reply was clear and concise