Capital Allowance on Car - Have I got this right?

JohnCleary

Hi all,
Will be popping into my accountant at some stage to seek clarification, but see the below image, am I right re. capital allowances for the car?

I claim 50% expenses on the car (albeit I could be going higher by rights), however keep it at 50% for the sake of an easy life.

Any advise much appreciated... if you need any more info, just shout. Cheers!

This is, of course, assuming I kept the car for 8 years. I own the car outright, no lease / hire / loans etc.



This is assuming 12.5% allowance per year: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-11/11-00-01.pdf

I note the following from PDF linked above:
"Group 1 contains categories A, B and C with CO2 emissions up to and including
155g/km. The allowable expenditure for these cars is the relevant specified
limit (currently €24,000 as set out in section 5 above), regardless of the actual
cost of the car. Thus, wear and tear allowances are based on deemed
expenditure of €24,000 even if the car actually cost less than this amount."

Does this mean that I could claim the full €24,000? I don't want to be taking the p1ss, however if i'm entitled to... why not.

Stratvs

That's not correct.

Cost of Car €39,500
Max for CA based on 120g CO2 €24,000
Annual W/T amount €3,000
Allowable W/T (assuming your 50% is acceptable) €1,500

You calculate the allowable amount AFTER restricting the car to max amount not before. Otherwise, per your example someone could have a €120,000 car allowable at say 20% for business and still get claim on €24,000 @ 12.5%PA.

See the Revenue example on page 3 here :-
https://www.revenue.ie/en/employing-people/documents/claim-car-expenses-capital-allowances.pdf
( I've printed it below )
Example 1
A car (CO2 emissions level of 170g/km) cost €26,000 in May 2017. Only €12,000 of this amount qualifies for wear and
tear allowances in accordance with Table 2. 2017 travel is 12,000km business use and 6,000km private use.
2017 wear and tear
€12,000 x 12.5% = €1,500
Restricted to 2/3 for business use = €1,000

JohnCleary

Stratvs, thank you for clarification.

I appreciate i'm not in an accountants office asking this question, but in your opinion, would below be acceptable?

Stratvs

Your accountant will know where you're coming from on that ok. Mind you, I don't see too many people coming in with the CA computations already done. That's usually something we end up doing as part of our tax work but it certainly helps if the trader understands where it comes from. Less explaining

Remember the closing Tax Written Down Value (TWDV) at end Y1 will be 24,000-3000=21,000 and so on in following years until you nit 0 or a disposal occurs.

JohnCleary

Stratvs, again thanks for your input on this

Just to put into context, while i'm not into accounting myself, I am very much into accounting / taxation that involves myself.

Secondly, my accountant is a family friend who assists as a favour (although he always gets a One4All voucher for his troubles), therefore I like to have as much prepped as possible. Traditionally, this was done by way of spreadsheet, although in the last year i've been using Wave which is a great tool, esp for bi-monthly VAT returns etc. It does have it's limits ie. I need to keep a separate record of Intra-EU purchases and now, Capital Allowances.... so hopefully you can see why i'm eager to have as much together myself as possible.

May I ask one more question? Regarding your 2nd paragraph and the diminishing TWDV rate. In this case, would I be right in saying...

Y1: 24,000 (Full Capital Allowance) x .125 x .5 (only half business use) = €1,500
Y2: 21,000 (24,000 - 3,000) x .125 x .5 = €1,312.50
Y3: 18,000 (21,000 - 3,000) x .125 x .5 = €1,125

and so on? If so, damn it! But rules are rules. I'd just like to have an understanding, for my own curiosity

OR, possibly like this?
Y1: 24,000 (Full Capital Allowance) x .125 x .5 (only half business use) = €1,500
Y2: 21,000 (24,000 - 3,000) x .125 x .5 = €1,312.50
Y3: 18,375 (21,000 - 2,625) x .125 x .5 = €1,418.44

Stratvs

JohnCleary wrote: »

Stratvs, again thanks for your input on this

Just to put into context, while i'm not into accounting myself, I am very much into accounting / taxation that involves myself.

Secondly, my accountant is a family friend who assists as a favour (although he always gets a One4All voucher for his troubles), therefore I like to have as much prepped as possible. Traditionally, this was done by way of spreadsheet, although in the last year i've been using Wave which is a great tool, esp for bi-monthly VAT returns etc. It does have it's limits ie. I need to keep a separate record of Intra-EU purchases and now, Capital Allowances.... so hopefully you can see why i'm eager to have as much together myself as possible.

May I ask one more question? Regarding your 2nd paragraph and the diminishing TWDV rate. In this case, would I be right in saying...

Y1: 24,000 (Full Capital Allowance) x .125 x .5 (only half business use) = €1,500
Y2: 21,000 (24,000 - 3,000) x .125 x .5 = €1,312.50
Y3: 18,000 (21,000 - 3,000) x .125 x .5 = €1,125

and so on? If so, damn it! But rules are rules. I'd just like to have an understanding, for my own curiosity

No problem. it's good to understand where it comes from.

The CA is 12.5% "Straight Line" i.e. on the original €24,000 so it's down to nil after 8 years. You were using what we call "reducing balance" there which was an older method used for vehicles. In your example it's €3,000 every year ( and allowance is 50% of that in your case)

The closing TWDV diminishes by €3,000 each year. But the CA amount is constant at €3,000 pa before restricting to allowable amount of 50%.

See Item 4 here for ref. https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-11/11-00-01.pdf

JohnCleary

Stratvs wrote: »

No problem. it's good to understand where it comes from.

The CA is 12.5% "Straight Line" i.e. on the original €24,000 so it's down to nil after 8 years. You were using what we call "reducing balance" there which was an older method used for vehicles. In your example it's €3,000 every year ( and allowance is 50% of that in your case)

The closing TWDV diminishes by €3,000 each year. But the CA amount is constant at €3,000 pa before restricting to allowable amount of 50%.

See Item 4 here for ref. https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-11/11-00-01.pdf

Fairplay, thanks a million.

I had indeed read the linked PDF earlier but obviously didn't get a full grasp first time round :pac:

In summary (even if i'm not fully correct), in my example above, i'm getting a Capital Allowance of €1,500 each year, right? I'll double check this with my accountant, but even if i'm on the right track with this calculation, i'm happy enough.... every day is a learning curve etc.

namenotavailablE

Yep- your above statement re a €1500 capital allowance is correct based on the data you entered earlier.

JohnCleary

namenotavailabl wrote: »

Yep- your above statement re a €1500 capital allowance is correct based on the data you entered earlier.

Deadly, thanks

Stratvs

JohnCleary wrote: »

Fairplay, thanks a million.

I had indeed read the linked PDF earlier but obviously didn't get a full grasp first time round :pac:

In summary (even if i'm not fully correct), in my example above, i'm getting a Capital Allowance of €1,500 each year, right? I'll double check this with my accountant, but even if i'm on the right track with this calculation, i'm happy enough.... every day is a learning curve etc.

Yep. On the ball now. Every day is a school day

Davio

I have a similar question.  I bought a car last year for 13000.  90% is for business use and 10% personal.  How much can I claim, please?

SureYWouldntYa

https://www.boards.ie/discussion/comment/118155711#Comment_118155711

Since 90% is business, you're allowed to claim against 90% of the value, which is €11,700, and you're allowed claim 12.5% of the initial value for 8 years, which is €1,462.50