buying Taxi

[Newbie22]

As a self employed geezer, I have just bought a van/taxi for £35k can I offset this against my tax? Can I claim 100% for my first year?

Thanking you kindly... :)

[elainec100@cheapaccounting]

it depends on the vehicle (is it really classed as a van or not), private usage etc

need more info on vehicle

Have you registered as self employed?

[Newbie22]

Hi Elaine,

Registered self employed, and have bought a taxi, to take people from place of work... Can I offset this cost against my tax as it is nearly £34k :| :(

[MyAccountantOnline]

Hi Elaine,

Registered self employed, and have bought a taxi, to take people from place of work... Can I offset this cost against my tax as it is nearly £34k :| :(

We dont have enough information you dont say what the vehicle is, its emissions, private use etc but if you want to deal with this yourself have a read here -

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073789933&type=RESOURCES

[elainec100@cheapaccounting]

what is the make, model of the vehicle, CO2s etc

[Newbie22]

the model is a TX4 which is a London Taxi... co2 emissions are 233... year is 2009... roughly £34k i paid..

thanking you kindly :)

[Newbie22]

From the link provided kindly by Nicola, it looks like I can only claim 10% of the total paid for my taxi, it is solely for business use. Is a cap on the amount I can claim in one given year? Also I am expecting it to last, as there London Taxi’s can last well over 200,000 miles… I paid £34k plus interest for it… I bought it in December 2009. So for my Tax return 6th April 2009 to 5th April 2010… I can only claim £3,400 WDA?
Is there anything else I can claim to further reduce my tax liability?

[Philip Hoyle]

If it meets the definition of a "hackney carriage", then for tax purposes it seems it's not a car, and if it's not a car, it would seem to be "plant and machinery" so you look to be able to claim annual investment allowance of 100% i.e. deduct the full £34k as an expense in your tax return, but nothing more in future years, and any proceeds you realise when you sell it will come back into your tax return as taxable income.

If you use the taxi for any private journeys, you have to pro-rata the capital allowance accordingly.

Look half way down the HMRC web page on capital allowances for cars:-

http://www.hmrc.gov.uk/manuals/camanual/CA23510.htm

It clearly says that hackney carriages aren't a "car" for capital allowances purposes so presumably that means the restrictions on relief for a car aren't applicable to your taxi.

[Newbie22]

If it meets the definition of a "hackney carriage", then for tax purposes it seems it's not a car, and if it's not a car, it would seem to be "plant and machinery" so you look to be able to claim annual investment allowance of 100% i.e. deduct the full £34k as an expense in your tax return, but nothing more in future years, and any proceeds you realise when you sell it will come back into your tax return as taxable income.

If you use the taxi for any private journeys, you have to pro-rata the capital allowance accordingly.

Look half way down the HMRC web page on capital allowances for cars:-

http://www.hmrc.gov.uk/manuals/camanual/CA23510.htm

It clearly says that hackney carriages aren't a "car" for capital allowances purposes so presumably that means the restrictions on relief for a car aren't applicable to your taxi.

Mr hoyle... thanks for your reply... does that mean HMRC are gonna owe me loads of money?? As surely this cant be the case? As I estimate I owe £4k in tax without the deduction of the taxi cost... so what would happen in this instance, they would owe me money, or would i offset it against next year? :)

[David Griffiths]

The general definition of "hackney carriage" is a vehicle that is licensed to ply for hire, so the existence of a local authority licence seems to be a pre-requisite here

It is possible to argue that a London cab is a vehicle

of a type which is not commonly used as a private vehicle and is not suitable for use as a private vehicle.

in which case the restrictions to cars wouldn't apply

[Philip Hoyle]

Mr hoyle... thanks for your reply... does that mean HMRC are gonna owe me loads of money?? As surely this cant be the case? As I estimate I owe £4k in tax without the deduction of the taxi cost... so what would happen in this instance, they would owe me money, or would i offset it against next year? :)

This gets very complicated so you'd be best to talk to your accountant, but you have options:-

1 Claim the full allowance to create a loss which can be carried forward to future years to reduce tax in the future or carried back to past years to reduce past year tax and trigger a repayment. This could waste your personal allowance for current, past and future years.
2 Restrict your claim to an amount equal to your profits, thus not wasting your personal allowance this year, but limiting your writing down allowance claim in future years, meaning that it takes a long time to get tax allowances over many years.

The only way to decide what to do is to lay out your business profits, any other taxable income, and taxes for several years, past and projected, and play around with the figures to see what gives you the best outcome.

NIC is a different kettle of fish as well - depending on how the "loss" is relieved, you may have different figures for losses carried forward against future profits for tax as opposed to class 4 NIC - that's another factor in the equation for what to do.

It also impacts tax credits as well - if you're claiming tax credits, the £34k capital allowance could radically increase your tax credit award for two years (09/10 and 10/11), which is yet another factor to think about.

Dealing with losses for tax purposes isn't for the faint hearted and your accountant really is the best person to optimise the situation over all the years potentially affected.

[Newbie22]

Could you help my little brain clarify something…
I estimate that for 5 years from 2009-2010 I will make a NET profit £10,000 I know I will pay 20% tax and class 4… But where do I include the purchase of the new taxi?

For example… profit = £10,000 (new car = £34,000) thus I carry forward £24,000 and pay no tax for 2009-2010…?
Just a simple calc would help me understand it, if you have time to quickly do one? Also for the record there are no tax credits or anything like that to consider. :)