Hello All, I have been looking at the HMRC website which seems to have a lot of useful information. Unfortunately getting to the right bit is not always easy. I am trying to understand the process of depreciation / capital allowance on motor vehicles for sole traders. My understanding is below. If anyone has the time not only to read, but also to reply I would be very grateful.
Sole trader capital allowances Company cars.
There are three points that I would like to understand;
·Calculating and claiming depreciation of cars.
·Calculating and claiming for the use of fuel.
·Claiming for running expenses, other than fuel.
Calculating and claiming depreciation of cars.
Vehicles bought after 6/04/09 have an allowance based on the CO2 emissions of the car.
20% for vehicles with an emission < =160 G/Km (18% from 6/04/12).
10% for vehicles with an emission > 160 G/Km (8% from 6/04/12).
100% for new vehicles with an emission <= 110 G/Km
The cost of the vehicle will exclude any excise duty or petrol supplied with the vehicle.
So for a vehicle purchased in April 2012 for £20000 with emissions of 160 G/Km the depreciation would be £3600 in year 1. Which I believe is restricted to £3000.
So year 2 the depreciation would be calculated on £17000 giving £3060, which again would be restricted to £3000.
Calculating and claiming for the use of fuel.
Where the vehicle is used solely for business purposes all fuel can be defined as an expense.
Where the vehicle is used for business and personal purposes the sole trader must keep a note of business and personal miles.
Business miles may be reclaimed using the Approved Mileage Allowance Payments (AMAPs) which are published annually.
.
Claiming for running expenses, other than fuel.
Expenses incurred in the normal running of the vehicle may be reclaimed as follows;
·Where the vehicle is used for business use only the 100% may be reclaimed.
·Where the vehicle is used for both business and personal purposes then the expense can be claimed in the same ratio as business to personal usage.
I am also a bit unclear on 'Annual Investment Allowance' and 'Pools'.
Can I be honest with you, what I would do is keep an accurate log of your business mileage. There are two reasons for this:-
a. There are two ways you can claim for motor expenses.
1. You can claim the business proportion of the vehicle running costs of the car plus capital allowance on the cost of the vehicle; 2. if you sales are less than the VAT Registration Threshold (currently £77k), you can claim mileage allowance for your business miles using approved HMRC rates (i.e. 45p per mile for the first 10,000 miles and 25p per mile thereafter).
In most scenarios, the mileage allowance method will be the best one. Once you have chosen you method, you cannot change it until you change vehicles!
b. If for some reason you choose Method 1. above, then you need to determine the percentage that the car is run for business purposes. So you will have to keep some form of mileage records to determine that percentage.
If you need a copy of a mileage sheet, then DM me you email address and I will send you a copy by return.
Whilst I could answer the questions I'm not going to directly as the issue is more fundamental in that the question is very wide and you are trying to take in a lot but you are not necessarily starting at the right point.
You need to take a step back in order to move forwards three.
Its not enough to know how segments of the tax system wprk but rather you need to know how it all fits together and whislt HMRC have all of the information they don't relay it in a way to make the reader understand it unless they understood it before going there for further details.
At least that one's only £20. It says advanced tax but in tax there is no basic or advanced, there is just tax and to be honest, having done that course myself I would consider it basic anyway no matter what it says on the tin.
Those two will get you started and give you a basic understanding of the current UK tax system. (note, never buy old tax books, they are a false economy. The melville book needs to be purchased every year until you get good at tax and then move up to Tolleys).
Sorry, there are no shortcuts to this knowledge. But, coming to the books and course with questions and confussion as to how it fits together does make it a lot easier to take in.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thanks Shaun, Part of the problem is that the system does keep changing. So reading old books does give a false impression. However I am trying to keep a specific focus on the sole trader and problems associated with their accounting. However any advice is gratefully received. Many thanks
it's a nightmare and an expensive one at that both in terms of books and time.
each year I get the Melville book (actually alternated it this year with Taxation, policy and Principles by Andy Lymer as it was getting to the point where I had reading fatigue from reading more or less the same book every year. Good as the lymer book is I'll be back to Melville next year after a years variance of reading material).
First time that you read Melville will take you about 12 to 16 weeks to get from front to back cover doing all of the questions in between.
The P6 course covers more ground but in less details.
For £60 though and 12 weeks dedication you will come out with a firm grasp of both principle and detail. You will still have plenty of questions but you will have a structure in which to make sense of the issues.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hello Shaun, I can find the Melville book but not the ACCA. There is an acca study text BPP but is £28. I don't want to pay more than I need to especially if it is the wrong book.
For info, when doing these courses I keep a list of the chapters in Excel and mark the date against when I do each one.
I expanded the first few mdules to include the sub chapters which will give you some indication on the sort of items that the course covers (often admittedly at a high level) :
Introduction to UK Tax System
- Principle Sources of tax law & Practice
- Administration of Tax
- Those Responsible for the administration of tax
- Inome Tax, Capital Gains & Corporation Tax
- Types of Income
- Tax Avoidance & Tax evasion
Computation of Income Tax
- Income Tax Computation
- Tax Exempt Income
- Non Savings Income
- Savings Income
- Dividend Income
- Deductible Payments
- Personal Allowances
- Age elated Personal Allowances
- Gift Aid
- Jointly Held Property
Employment Income - Part 1
- Scope of Employment Income
- Introduction to taxable benefits
- Living Accomodation
- Company Cars
- Private Fuel
- Vans
- Authorised Mileage Rates
- Use of employers Assets
- Gift of Employers Assets
- Cheap Taxable Loans
- Tax Free Benefits
- Allowable Deductions
- Employed or Self Employed
Employment Income - Part 2
- Personal Service Companies
- Termination Payments
- Share Option Schemes
- Share Incentive Plans
Pensions
- Contributions by the individual
- Tax Relief on Contributions
- Contributions by the employer
- Receiving Benefits from pension arrangements
EIS & VCT
- EIS - Income Tax Relief
- EIS - Capital Gains Tax Relief
- SEIS - Income Tax Relief
- VCT - Income Tax Relief
- VCT - Capital Gain Tax Relief
Property Income
- Income from Property
- Allowable Deductions
- Furnished Lettings
- UKproperty income pro forma
- Calculating UK property income
- Premiums on leases
- UK Property income losses
- Furnished Holiday Lettings
- Rent a Room Scheme
Computing Trading Income
- Badges of Trade
- The Adjustment of Profits
- Non Trading Income
- Practice Questions
Capital Allowances : Plant & Machinery
- Overview
- Plant & Machinery - Qualifying Expenditure
- Annual Investment Allowance
- The Main Pool
- Special Rate Pool
- Small Balances in the Special Rate Pool
- Calculating Basic Allowances
- Allowances for Cars
- Private Use Assets
- Short Life Assets
- Enhanced Capitral allowances and first year tax credits
- Tax Planning and Capital Allowances
Assessable Trading Income
- Current Year Basis
- Opening Year Rules
- Closing Year Rules
- Questions on Opening and Closing Years
- Change of Accounting Date
- Partnerships
- Joining & Leaving Partnerships
Trading Losses
- Personal Tax Trading Losses
- Current and / or prior year relief against net - income
- Carry Forwards trade loss relief
- Choice and/or order of loss reliefs
- Relief against gains
- Early years trade losses relief
- Terminal Loss Relief
- Loss relief on Transfer to a company
- Partnership Losses
- Losses Questions
Capital Gains (Individuals) - Part 1
Capital Gains (Individuals) - Part 2
Overseas Aspects of Personal Tax
National Insurance Contributions
PROGRESS TEST 1
Self Assessment & Payment of Tax
Inheritance Tax - Part 1
Inheritance Tax - Part 2
Trusts
Stamp Duty
Taxation of Comapnies - Part 1
Corporation Tax Losses
Taxation of Companies - Part 2
Chargeable Gains for Comapnies
Groups
Overseas Aspects of Corporation Tax
VAT - Part 1
VAT - Part 2
Tax Planning
Exam Prep
PROGRESS TEST 2
For the Melville book you can look at the contents index via the look inside on Amazon.
hth,
Shaun
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hello Shaun, Many thanks for your help, both books now ordered. Why can I sometimes submit a quick reply and yet othertimes seem to be a standard reply?
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Many thanks for the recommendation to buy the 'Taxation finance act 2012'. I have read the first few chapters and though there were a couple of paragraphs I had to read a few times, in the main it is a straight forward read.
