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Motor Vehicle Depreciation-self-employed

  • 21-08-2009 4:59pm
    #1
    res ipsa
    Registered Users, Registered Users 2 Posts: 692 ✭✭✭


    I wonder if anyone can help me with this query?
    I suffered depreciation of approx 60% on my car in 2008, based on Revenue's VRT valuations. I used this car 90% for business purposes.
    Am I entitled to claim 54% depreciation based on the revenues valuation of the car in January 2008 or not?
    Many thanks in advance,
    Res


Comments

  • #2
    misspiggy40
    Users Awaiting Email Confirmation Posts: 277 ✭✭misspiggy40


    Hi there. The thing is that the rate you put in your accounts should be as close to a reflection of the real life value of the item as possible so that it 'Fairly and accurately' represents the asset you own. However, this does not follow through to your deductions for tax purposes....ie your capital allowances which are set by revenue to a specific percentage or formula.

    Take this example;

    You buy a car for €20,000 which is worth €12,000 by the end of the year. You would put down €8,000 as your depreciation figure.....very simplistic but let's just follow through.

    However in your tax return you would only be able to put down 12.5% of the vehicles value ie €2,500 x 90% (business use) as a deduction under capital allowances. There is also a ceiling for the value of motor vehicles which is €24,000.....€24,000 x 12.5% is the max you can claim........ and a condition with regard to the co2 emmissions. see extract below.

    So if your accounts profit was, say, €40,000 you would ad back the €8,000 depreciation and deduct the €2,250 capital allowance to get your taxable profit. Does this help??

    Extract ref co2 emissions

    Motor Vehicles
    The annual allowance for motor vehicles (other than taxi and short-term hire vehicles) is 12.5% on a straight line basis for expenditure incurred on or after 4 December 2002 (previously 20% per annum on a straight line basis). The maximum qualifying cost of motor vehicles purchased on or after 1 January 2007 is €24,000 (with varying figures applying for prior years). The €24,000 restricted cost applies to both new and secondhand motor vehicles.
    A revised scheme for capital allowances and leasing expenses for cars used for business purposes is being introduced from 1st July 2008. The revision will link the availability of such allowances and expenses to the CO2 emission levels of the vehicles. Cars will be categorised by reference to CO2 emissions with the emissions bands being broadly consistent with the new VRT system, as follows:

    Category A Vehicles 0 –120g/km
    Category B/C Vehicles 121 – 155 g/km
    Category D/E Vehicles 156 – 190 g/km
    Category F/G Vehicles 191 g/km +

    Cars with CO2 emission levels in Category A/B/C above will benefit from capital allowances at the current car value threshold under the existing scheme of €24,000, regardless of the cost of the car. Cars in Category D/E will receive allowances of 50% of the current car value threshold or 50% of the cost of the car, if lower. Cars in Category F/G will not qualify for capital allowances.


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