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Where Taxpayers and Advisers Meet

When is a car not a car?

SLL
Posts:2
Joined:Sat Jan 10, 2015 11:14 pm
When is a car not a car?

Postby SLL » Tue Jun 26, 2018 1:26 pm

My micro-entity Ltd co undertakes engineering consultancy in mainly automotive areas.

I have bought a secondhand, non-registered, non-running (doesn't even have an engine at the moment) kit car to develop our know-how and to try out a few ideas I have for design improvements. Ultimately, I do intend to have this running (likely with a petrol engine in the short term, but possibly electric longer term).

Admittedly, at the time, I did not know that cars were not AIA-able. I'm now wondering how to put this through the books.

Can it be AIA-able if it is not a complete car?
Could it go through as an R&D allowance? (the improvements I'm planning are relatively minor, so might not be classed as R&D)
Do I just stick it in the main pool and take a writing down allowance over then next 5 years or so? (But what CO2 rating - it doesn't have an engine...)

I'm keen just to stick with what is easiest and safest, rather than push the definitions to try and save a little bit of tax...

AdamS93
Posts:268
Joined:Tue Sep 26, 2017 6:28 pm

Re: When is a car not a car?

Postby AdamS93 » Tue Jun 26, 2018 9:03 pm

Capital allowances at 18% is the safest. AIA is good but when you sell the asset you will be hit with a balancing charge (potentially). Whatever method you choose, the relief via capital allowances will be the same over the period the asset is held.

As for R&D, buying a kit car is hardly innovative so I think you’re pushing your luck there.

Once the car is up and running and available for use, you will be hit with a benefit in kind tax charge. For this reason, it may be better to keep the asset outside the limited company altogether.

See an accountant before this comes back and bites you....

AdamS93
Posts:268
Joined:Tue Sep 26, 2017 6:28 pm

Re: When is a car not a car?

Postby AdamS93 » Wed Jun 27, 2018 1:28 pm

Actually thinking about it - to qualify for R&D expenditure it must be revenue expenditure. Therefore, R&D relief will not be available full stop.


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