Claiming VAT on vehicle repairs - proportional to business use

[Martin at NixonWilliams]

I see what you're saying but I still think NLUK might have a point. I know you're talking about benefit rules and we've also discussed VAT, but what about being allowable for corporation tax in the first place? Wouldn't the purchase of the van have to meet the general test for business expenses (wholly and exclusively) to be allowable for a deduction in taxable profits and if queried you'd need to justify the purchase? Or are there specific rules for vehicles that trump the general rule?

Not if it is being provided as a benefit - It is an alternative to paying salary, HMRC will never argue with that for CT purposes providing the overall remuneration package is not excessive.

[Martin at NixonWilliams]

I a bit of an amateur but I am surprised that purchasing an asset would decrease CT liability. Don't you use depreciation of asset value over following years to decrease CT instead? Of course then, your question would apply to depreciation.

Depreciation of a vehicle is not allowable for CT purposes. The depreciation is added back to the accounting profit when calculating the total taxable profit and so does not receive any relief.

As part of the total taxable profit calculation you receive capital allowances, which are a tax deduction given on the value of assets usually at a rate of 8%/18% per year on a reducing balance basis or 100% in the first year if eligible through annual investment allowance (AIA) or some other means.

[TheCyclingProgrammer]

Not if it is being provided as a benefit - It is an alternative to paying salary, HMRC will never argue with that for CT purposes providing the overall remuneration package is not excessive.

Right, so basically the business purpose is..."to provide a benefit to our employees", rather than "to move equipment around" then and therefore passes the wholly and exclusively test?

An interesting twist.

[Martin at NixonWilliams]

Right, so basically the business purpose is..."to provide a benefit to our employees", rather than "to move equipment around" then and therefore passes the wholly and exclusively test?

An interesting twist.

Correct - It is just another form of remuneration. Providing the overall remuneration package is not excessive it would be fine.