Tax to pay on second vehicle? Sole trader

[Steve Jones2]

My 2015 BMW 220d car broke down in early January.I am a sole trader. The car is worth about £2000 in current condition.
So I bought another car for business use (about 95% of my journeys are business).

I haven't sold the old vehicle.It's just sitting there.It doesn't work as it needs extensive mechanical repairs.
My accountant has told me its taxablle value is £11000.Its emissions are 124g/km, and is a diesel car.

Does this sound right? I don't see why I have to pay tax on £11000 asset for a car that's not useable.

 

[DWS]

Who valued the car at £2K?
What’s the current ‘written down value’ in the capital allowance pool?

 

[Steve Jones2]

2k is what webuyanycar will offer me.
I don't know the written down value.How do I calculate this?

 

[DWS]

I would get another valuation and if similar go back to your accountant to show the true value of the car.
Why are you not selling it?
Written down value is what the car was valued at when brought into the business minus any capital allowances claimed, the figure left is the WDV and will be used for the disposal to calculate whether there will be a balancing charge or a balancing allowance.

 

[David Griffiths]

You say that you are a sole trader, yet the figures that you have been given about taxable value and emissions sound as if they are relevent to the provision of a company car to a director or employee (although the taxable value of £11k seems way too low for any BMW.) I can't see how any of those figures relate to tax for a sole trader.

The written down value would be the latest value based on cost less total capital allowances claimed. The vehicle should be in a separate "pool" of it's own. If you've not sold the car then there would be no adjustment to that, and no personal tax to pay. The personal tax liability would arise by disallowing a percentate of motoring costs based on private use. If thee are no costs for this vehicle then there is noting to disallow

 

[JEREMY HAWKE]

It's worth 11K as your accountant has highlighted
Its worth 2K to most people as it is a POS
Remember we have had new vans that are worn out at 4 years old but they are always regarded at the full book value for business porposes even most of the gearbox is somewhere up on the M6

 

[DWS]

You say that you are a sole trader, yet the figures that you have been given about taxable value and emissions sound as if they are relevent to the provision of a company car to a director or employee (although the taxable value of £11k seems way too low for any BMW.) I can't see how any of those figures relate to tax for a sole trader.

The written down value would be the latest value based on cost less total capital allowances claimed. The vehicle should be in a separate "pool" of it's own. If you've not sold the car then there would be no adjustment to that, and no personal tax to pay. The personal tax liability would arise by disallowing a percentate of motoring costs based on private use. If thee are no costs for this vehicle then there is noting to disallow

Hi David, if the asset is no longer in use for the business would this not be classed as a Disposal?

 

[Gecko001]

Disregarding the tax implications, if the book value is £11,000, and you say it is worth £2,000 then it follows that the needed repairs to the car would be £9,000. Have you gone to more than one garage to get it repaired? Many garages will say things like "that car is dead and cannot be fixed", when in fact they mean they cannot fix it, while in fact there are others who can, and at a reasonable price.

 

[David Griffiths]

Hi David, if the asset is no longer in use for the business would this not be classed as a Disposal?

I'd say that would depend on the facts. If its business use is only temporarily discontinued, then no - you'd carry forward any pool balance and write down as appropriate. On the other hand if the discontinuance is likely to be permanent then I'd record it as removed with a sale value of £2,000. Looking at the first post again, it now occurs to me that the tax value is the balance on the pool, so there would be a balancing allowance of £9,000 subject to any private use restriction. it will be in a pool of its own because there has been private use, so quite straightforward.

I think that everybody has interpreted the figure of £11k as the book value of the car, as I did, but I now think that it's the tax written down value which makes much more sense

 

[DWS]

I'd say that would depend on the facts. If its business use is only temporarily discontinued, then no - you'd carry forward any pool balance and write down as appropriate. On the other hand if the discontinuance is likely to be permanent then I'd record it as removed with a sale value of £2,000. Looking at the first post again, it now occurs to me that the tax value is the balance on the pool, so there would be a balancing allowance of £9,000 subject to any private use restriction. it will be in a pool of its own because there has been private use, so quite straightforward.

I think that everybody has interpreted the figure of £11k as the book value of the car, as I did, but I now think that it's the tax written down value which makes much more sense

I got the impression that the OP has now bought a new car for business so this one is no longer in business use, which was why I asked why they have not sold it, OP would need to confirm the facts.
I certainly would not be happy submitting only one valuation of £2K as disposal proceeds, I think another in the same region would help if HMRC were ever to enquire.
As per the WDV again only the OP can answer this but my thoughts were that the accountant had looked and come up with a £11k MV based on the age and make of the car, I did a quick Google and that does seem to be an average price, again only OP can give definitive answers.

 

[MyAccountantOnline]

My 2015 BMW 220d car broke down in early January.I am a sole trader. The car is worth about £2000 in current condition.
So I bought another car for business use (about 95% of my journeys are business).

I haven't sold the old vehicle.It's just sitting there.It doesn't work as it needs extensive mechanical repairs.
My accountant has told me its taxablle value is £11000.Its emissions are 124g/km, and is a diesel car.

Does this sound right? I don't see why I have to pay tax on £11000 asset for a car that's not useable.

If you are unsure do ask your accountant - it's what you pay them for.

You may also find this helpful https://www.gov.uk/capital-allowances/business-cars

 

[UK Contractor Accountant]

My accountant has told me its taxablle value is £11000.Its emissions are 124g/km, and is a diesel car.

think he means tax written down value is £11K with emissions determining the rate of writing down allowance for tax (6% probably)