Sole Trader Car Purchase

worc

I’m currently a sole trader and will be that way for only 12 months and that’s it – contract obtained will finish at that stage and I will be going back to an employee job.

I’m buying a car and trying to work out the best option regarding tax. Excluding other expenses the tax to pay revenue will come in around the €8k mark.

I was initially looking at a lease agreement but given I will only be a sole trader for 12 months this doesn’t seem like a viable option as they come as 3 year deals and I’d only be making use of 1 years worth and have to pay the additional 2 years without being able to write that off against tax.

Then there’s the hire purchase agreement or there's the just pay cash upfront but I’m not sure about what % of the car I can write off against tax if I do either of these.

The car would be used 75% for current contract work and 15% personal usage.

I have an appointment booked with an accountant next week and will bring this up but I like to have my own knowledge on things also - my head is a bit fried trying to work things out from the Revenue leaflets so if anyone had advice on best option to allow me to write % of car off against tax I’d be very appreciative.

J.Ryan

At first glance, a lease is the way to go, 75% of the lease payments you make in year one will qualify for tax relief.

HP or paying in cash, won't get you that level of relief.


However driving to and from the site you work at from your home is not business milage, so you may want to rethink your % business use.

J.Ryan

worc wrote: »

.....

The car would be used 75% for current contract work and 15% personal usage.

.......

What happened to the other 10%?

worc

Cheers for the reply.

J.Ryan wrote: »

At first glance, a lease is the way to go, 75% of the lease payments you make in year one will qualify for tax relief.

HP or paying in cash, won't get you that level of relief.

So if car was €30k with 3 year lease, then in year 1 I could write off €7500?

I didn't realise that 75% write-off for lease...hmmm... There's something about paying money beyond the 1 year for a car I'll have to hand back afterwards that feels odd. I'd be wanting to hold onto the car for the long term... Would you have a general idea of the % I could write off if I went HP/Cash?

To be fair, I didn't even realise I could potentially write a % off so even 5% is a result for me - it's not that I'm trying to get it worked out so I have to pay nothing in tax, more just don't want to find out sometime down the line I could have saved myself a few hundred really.

J.Ryan wrote: »

However driving to and from the site you work at from your home is not business milage, so you may want to rethink your % business use.

Yeah that's come up before alright - the work requires travel to different sites and also work from home office - checked with the accountant over the phone about that issue and he's adamant the travel to any site, even the one I'm at most often, would be a valid business expense. He was listing off things he wouldn't ever put through as business expenses that he has clients asking him to so pretty sure he's above board with things.

Also, contract is with a government body who were very stern with me at beginning that my use of any government building to complete work was purely because they had left over space and that I am under no obligation to be at their premises to complete the work - it's a personal choice to go there.

J.Ryan wrote: »

What happened to the other 10%?

See that's why I need an accountant should have been 75:25...sorry!

Thanks again for the reply.

J.Ryan

There is (or there was the last time it came up) a restriction on the value of the car, that is allowed for tax purposes, also motor expenses would be restricted by the level of the limit divided the value of the car.


Leases are treated as rental costs for tax, while HP is a loan repayment, however if you complete the lease and take ownership of the car, that is another issue.

The 75% I gave was because you said the car was 75% business use.