Hi I'm doing an SA for a part time gym instructor and his first accounts have a turnover of £2000.
It is better to claim actual expenses and 10% capital allowances as the value of the car introduced was £20K and there is 25% business use.
I nearly reverted to the 40ppm being concerned that he may get fleeced on a balancing charge when he sells it. However they are for sale at around £15K and he'd have a WDV of £16K at Y/E 31 March 2012.
I just have misgivings about claiming half the turnover on what was a slightly frivolous vehicle purchased out of redundancy pay to cheer himself up. I'm sure it cheered him up no end but I can't see him ever doing £10K turnover in this business and at that level the last thing I want to do is attract attentions of the Revenue.
My concern is that a Gym Instructor has introduced a Hairdressers car into the business, surely this will set alarms going! Can a share of a vehicle not be introduced or am i way off? At this point in my studies i do tend to make my own rules sometimes. (really interested in how you guys and gals work this stuff out) Also when you are comparing prices for any second hand (used) assets a business has purchased how would you go about evaluating them? If you use a book like auto trader or parkers guide for vehicles would you work on current trade prices or retail price? I understand stock is valued at the lesser but just wondered about non current assets. Sorry for messing with your post Tim. Thought i'd say hello.
Neil.
-- Edited by Spamkebab on Sunday 25th of September 2011 08:54:06 AM
You don't have to claim capital allowances if it does not benefit your client. They can be restricted to any amount from Nil to the maximum you are permitted to claim. If you say restrict it to say nil, then you can carry forward the full amount to next year, and decide then to make a claim, restrict it again etc. depending on his income etc at the time. Of course if he sells he vehicle then you will have no choice but to claim any loss (?) then as you will have no option any more.
I have a client who is able to purchase cars for £70 - £90k and always sells them for about the same amount a couple of year later. Hes been doing it for the last 20+ years, and I always restricted the CA to nil, putting the claims (which occassionally are balancing charges) The HMRC did look into him about 14 years ago, but they could not find anything they weren't happy with and were amazed by the way he ran his business and the discounts he got when purchasing his cars.
-- Edited by YLB-HO on Sunday 25th of September 2011 10:34:05 PM
lol @ hairdressers, Neil. Hey, i knew I'd get you interested in self assessment. Yep Parkers or Auto-trader. A valuation is open to arguement, but the more accurate, the less HMRC are likely to challenge it. He does stuff like 'yoga' and 'spin', whatever that is.
Hi Trueman. 1400 business miles and £1072 total fuel cost - approx 25% business use. I'd expect him to turnover £5K in the current year, and I'd expect his business miles to double.
EDIT - Just spoken to him and he's devoting more time to it and doing £1000 per month turnover. He'll be doing more sessions at the same venue on the same day so the motor fuel cost won't rise at the same rate.
Hi Frauke. I'd like to reduce his tax to nil and your example puts my qualms firmly in perspective. I was thinking of restricting the capital allowances or some other means of disclaiming, just as an insurance policy. Family friend, so don't want to get him into bother.
As background, he also has a reasonable part-time employment and has good accurate records.
Thanks for responding gang. Tim
-- Edited by Don Tax on Monday 26th of September 2011 03:40:34 PM
