Expert on getting cash back from your motor

The real cost of motor vehicles Motor vehicles are something which most businesses will purchase fairly regularly.

However, the tax implications of the purchase vary greatly, depending upon the type of vehicle.

Ability to reclaim inputVAT Input VAT on cars is blocked, meaning it cannot be reclaimed.

The only exception to this is where a qualifying car is purchased and used for a relevant purpose.

For farmers, this means that VAT can be reclaimed on a car if it is used exclusively for business purposes and is not made available for private use.

This is unlikely to be the case for most farmers, and so generally VAT cannot be reclaimed.

However, input VAT on motor vehicles other than cars can be recovered.

For example, a vehicle which is designed to carry passengers, but has a payload of more than one tonne, is not a car.

Therefore, most twin cab pick-ups are not cars for VAT purposes, and input VAT can be recovered.

Commercial conversions ie where there are no back seats, and no side windows, are also not classed as cars, and likewise VAT can be recovered.

Reclaiming input VAT on fuel is allowed for both cars and vans, but if there is any private use, a fuel scale charge adjustment based on CO2 emissions must be made, and the private element of the fuel cost disallowed in the tax computation for partnership/sole trader businesses.

It is worth remembering that travel between home and the farm (where the individual does not live on the premises) is classed by HMRC as private travel.

Capital allowances For capital allowance purposes, vehicles which are primarily designed to carry goods, are not cars.

Again, double cab pick-ups with a payload of more than one tonne and other commercial vehicles such as vans are not deemed to be cars.

The distinction is important as cars do not qualify for the Annual Investment Allowance (AIA), and therefore capital allowances are only available at 8% or 18% per annum.

The rate depends on the CO2 emissions of the vehicle.

Cars with emissions <160g/km (<130g/ km fromApril 2013) receive the higher rate, and vehicles with emissions over that attract the lower rate of 8%.

Very low emission cars, ie those with emissions <110g/km (95g/km from April 2013), attract 100% tax relief in the year of purchase.

Other motor vehicles which are not cars qualify for plant and machinery allowances, and thus the AIA is available.

If the AIA has been fully utilised or is not available to your business, normal writing down allowances can be claimed at 18% per annum.

Thus although businesses will receive tax relief in full for the cost of both cars and vans over a period of time, it is much more rapid for vans.

Of course any capital allowances claim on cars or other vehicles is reduced where there is any private use of the vehicle.

Benefit in kind Where the business trades as a limited company, vehicles provided to employees/ directors will be taxed as a benefit in kind.

The level of benef it depends upon whether the vehicle is a car or a van.

Vans have a flat rate benefit of £3,000.

Fuel provided for private use in vans is also calculated at a flat rate of £550 per annum.

Thus the maximum tax payable by a basic rate employee is £3,550 x 20% = £710.

Car benefits are based on the list price of the car and its CO2 emissions.

The list price of the vehicle is used, no matter the age of the car.

The benefit is calculated by multiplying the list price by a percentage based on the emissions.

This percentage varies from 10% for CO2 emissions up to 99g/km, to 35% for emissions of 220g/km and over.

Where fuel is also provided by the employer for private use, the fuel benefit is calculated using the same percentage as above, and multiplied by a flat rate of £20,200.

This is the same whether the employee drives one or several thousand private miles.

Class 1A NIC is also payable by the employer at 13.8% on van, car and fuel benefits.

It is not difficult to see from the above that owning cars through a limited company can be very costly for both employee and employer.

The rates for the next few years have also been announced and these will make company car taxation even more expensive.

Therefore, most farmers trading through a limited company own their cars privately and charge the company for business use.

The distinction between a car and van for benefit purposes follows the rules for VAT.

Therefore, vehicles with a payload of more than one tonne (ie most double cab pick-ups) are treated as vans for benefit purposes, which is very useful given the CO2 emission levels of such vehicles. Alan Taylor is a partner with accountants Campbell Dallas in Perth. and in past years we have become (among others) Mrs and Mrs TrumpingtonFudge, Lady PipistrelleParsley and Lord Fungus Stoorie.

My husband also has a game fair diet, which never really deviates from a venison burger and local ale (11am), hog roast or steak roll (1pm), another local ale (2-ish) and a crepe (if available) at about 3pm.

For the next five days I try and restrict him to a vegetarian, low-carb diet.

If the weather is good and there are a few of us at the fair, we will stay behind and spark up the barbecue.

Having trawled the food marquee for fat sausages, soft fruits and (by now) the ubiquitous local ales, we enjoy a bit of tailgating into the early evening.

Of course, the flip side is when it is raining and our two young children have mud up to their middles, a spaniel has just relieved itself on my welly and the car is stuck in said field.

But despite the unpredictable summer weather, I’m looking forward to the 2013 game fair season.

Alan Taylor, of Perth accountants Campbell Dallas, offers advice on tax and vehicles.