Car wrote off, can I claim it's full cost as an expense?

Howdy folks,


Just looking to see if anyone can gimme a nudge in the right direction here, as I'm quite curious.


I do enormous mileage (self employed, sole trader - do have an accountant but he's not working til tomorrow and this is wrecking my head, so figured I'd ask on here to see if any clued in boardsies may know). I buy cheap and cheerful cars, and usually after a year, swap them over and move along to something else. Try to avoid maintenance, etc.

I typically tend to spend around €1,500 and get a year out of a car (based on the last 2-3 years).

This year (or, 8 weeks ago) I spent 3k on a car (and maintenance on it). Engine went on the car this week, and it's effectively a large paper weight now.


I was wondering, if I scrap it, and get a certificate of destruction, can I claim back the full expense of buying it in the first place? (I'm just trying to take the bitterness out of the experience, and being able to offset the situation against my tax bill next year would at least be something positive in an otherwise wholly-crap situation).


Thanks

Calahonda52

You can't expense what is a loss on disposal of an asset against your trading profits.

Car99

[Deleted User] wrote: »

Howdy folks,


Just looking to see if anyone can gimme a nudge in the right direction here, as I'm quite curious.


I do enormous mileage (self employed, sole trader - do have an accountant but he's not working til tomorrow and this is wrecking my head, so figured I'd ask on here to see if any clued in boardsies may know). I buy cheap and cheerful cars, and usually after a year, swap them over and move along to something else. Try to avoid maintenance, etc.

I typically tend to spend around €1,500 and get a year out of a car (based on the last 2-3 years).

This year (or, 8 weeks ago) I spent 3k on a car (and maintenance on it). Engine went on the car this week, and it's effectively a large paper weight now.


I was wondering, if I scrap it, and get a certificate of destruction, can I claim back the full expense of buying it in the first place? (I'm just trying to take the bitterness out of the experience, and being able to offset the situation against my tax bill next year would at least be something positive in an otherwise wholly-crap situation).


Thanks

Replace the engine and expense that

barneystinson

Calahonda52 wrote: »

You can't expense what is a loss on disposal of an asset against your trading profits.

Ever heard of capital allowances?

Calahonda52

barneystinson wrote: »

Ever heard of capital allowances?

Indeed I have, I hear it as the OP want to expense the 3k in the P&L all in one go.

being able to offset the situation against my tax bill next year

maybe I need to replace my hearing aids

I doubt if he means over 8 years, or will he just get a different car every couple of years and have a very large Motor Vehicles not to the accounts.

barneystinson

Calahonda52 wrote: »

Indeed I have, I hear it as the OP want to expense the 3k in the P&L all in one go.

being able to offset the situation against my tax bill next year

maybe I need to replace my hearing aids

I doubt if he means over 8 years, or will he just get a different car every couple of years and have a very large Motor Vehicles not to the accounts.

What're you talking about 8 years, do you not understand how Balancing Allowances work when you dispose of an asset or it becomes obsolete?!

https://www.charteredaccountants.ie/taxsource/1997/en/act/pub/0039/nfg/sec0288-nfg.html

howardmarks

Tax aside, if you do enormous milage would you not be better served getting a newer more reliable vehicle and expense any finance costs or depreciation against your taxable income.
Bangernomics or the art of buying a cheap car and running it til it dies is probably more suited to a non business vehicle that you don't depend on for your income no?

Calahonda52

barneystinson wrote: »

What're you talking about 8 years, do you not understand how Balancing Allowances work when you dispose of an asset or it becomes obsolete?!

https://www.charteredaccountants.ie/taxsource/1997/en/act/pub/0039/nfg/sec0288-nfg.html

What i heard the OP ask was could he fully expense the crock through his P&L in one go, to which the answer is no.

If you chose to answer another question be my guest

barneystinson

Calahonda52 wrote: »

What i heard the OP ask was could he fully expense the crock through his P&L in one go, to which the answer is no.

If you chose to answer another question be my guest

Did you read the OP to the end?!

"I'm just trying to take the bitterness out of the experience, and being able to offset the situation against my tax bill next year would at least be something positive in an otherwise wholly-crap situation."

Sole traders don't give a hoot about their accounts, the tax bill is the bottom line.

Anyway, you're the one who mentioned 8 years, demonstrating ignorance of the actual subject of the OP's enguiry, when there clearly is a 100% allowance if the vehicle goes kaput in year 1.

frozenfrozen

Is there a link explaining what ye are talking about with cars for sole traders? I need to get a vague grasp of it before asking accountant

Charlie19

I was always under the impression that anything spent on the business can be offset against the tax bill.

barneystinson

Only items of current expenditure can be written directly off as expenses in full in the year they are incurred ie things that are fully consumed within 12 months. Light & heat, fuel & maintenance of motor vehicle, employee wages, insurance, rent etc...

Capital expenditure, the cost of acquiring assets that are expected to endure for the benefit of the business, have to be written off over a longer period. The accounting rules and the tax rules are slightly different, which is what Calahonda and I are splitting hairs over.

In accounting terms, an asset gets written off over its expected useful life, which allows for a subjective decision by the owner. So if you decide that your asset will be obsolete within 3 years, you can write the cost of the asset off against your profit over 3 years. Note, this is just the accounting treatment. For the purposes of calculating your taxable profit, this deduction is ignored.

For tax purposes it doesn't matter how long you think your asset will last; you get a deduction for tax purposes, over a prescribed period, which is 8 years for most assets.

When an asset becomes worthless then, for both accounting purposes and for tax purposes, you take a deduction for the remainder of the amount not yet written off. Which, in this case, means a 100% write off in the year.

thegolfer

Normal position is that you write off the asset off over 8 years, however in circumstances which warrant it the asset can be written down to nil and a balancing allowance claimed, in effect writing the asset off against your profits.if there are insurance proceeds these reduce the claim in the profit and loss, taxable as such.

Stratvs

frozenfrozen wrote: »

Is there a link explaining what ye are talking about with cars for sole traders? I need to get a vague grasp of it before asking accountant

Tax treatment :-
https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-11/11-00-01.pdf

frozenfrozen

Thanks. If I bought a used car for 24k which had under 155g Co2 I could take 3k off my profit for 8 years or until the vehicle is 8 years old?

howardmarks

Cheers to each of ye for the replies. I rang my accountant (well, his assistant) and I don't know if he fully grasped what I was telling him, and he also said something to the effect of 'over 8 years'.

I simply don't know enough about the best way to deal with this kind of thing, is the truth. Taxation is not my strong point.

I will make a note of the car on my accounts, and I'll swing into my accountant to meet him in-person in early January with my 2020 income/outgoings and have a proper chat with him about seeing is there anything I can do about it.


To clarify my original post, what I was essentially asking is (and again, I'm not a tax expert) if I owe revenue €10k next year, can I reduce it by the amount i spent on the car, as the car came and went in the same year. So if the car cost me €3k, I'd only owe revenue €7k (just making these numbers up).

The replies have been very helpful, but this is the sort of thread I'll have to read a few times over to grasp properly. :)

howardmarks wrote: »

Tax aside, if you do enormous milage would you not be better served getting a newer more reliable vehicle and expense any finance costs or depreciation against your taxable income.
Bangernomics or the art of buying a cheap car and running it til it dies is probably more suited to a non business vehicle that you don't depend on for your income no?

I'm not really raking it in, to be honest. I'd say I made about 35k last year, so to spend 25k on a car wouldn't be sensible (though "spending 3k on a car every 2 months isn't sensible either", i hear you say, but surely I'm due some decent luck sooner or later. )

mickdw

frozenfrozen wrote: »

Thanks. If I bought a used car for 24k which had under 155g Co2 I could take 3k off my profit for 8 years or until the vehicle is 8 years old?

Be careful.
As a sole trader, you will likely be using the car for part business and part private use.
In that case, you claim the business percentage useage so if 50 percent business use, you would be knocking 1500 off your profits. You can also claim all car expenses in a similar manner.

Just in relation to the car being band a b or c, ive read the tax documents many time and it appears to say that once the car is within those bands, that you can claim the full 24k over 8 years regardless of how much eas paid for the car.
In relation to band D cars, the tax documents very clearly state 50 percent of 24000 or 50 percent of car value whichever is lower.
What are the opinions of the knowledgeable tax people here?

frozenfrozen

Kkv make sure you are thinking of money off your profits not money off your tax bill.

And thanks mick, I do need to remember it would be split with personal use. Really doesn't do a whole lot to the tax bill after Id get 12.5% of 50% of 24k off the profit per year

Sent my accountant an email about it anyway