EIM36925 - Deductions from earnings: capital allowances: example: adjustments for private use
This example illustrates adjustments for private use. It also shows that assets which are used privately as well as for business are not pooled, either with each other or with assets used wholly for business (see EIM36660).
A travelling salesman working from home takes up employment in Newcastle on 6 April 1999 and is obliged immediately to purchase a car (cost £7,200) and a word processor (cost £1,200) for use in the performance of the duties. The car is used privately for 20 per cent of its mileage, the word processor is used 95 per cent of the time for business.
In June 2000, as a result of a new sales campaign, the salesman is required to buy a copier costing £600. It is accepted that the copier is used wholly for business.
First year allowances and writing down allowances are claimed as follows.
|
Car | Word processor |
Copier | Total allowances | |||
|
£ |
£ |
£ |
£ |
|||
| 1999/00 | ||||||
| Cost |
7,200 |
1,200 | ||||
| FYA(40%) |
480 | (x 95% = 456) |
456 |
|||
| WDA(25%) |
1,800 | (x 80% = 1,440) |
1,440 |
|||
| Residual value |
5,400 |
720 | ||||
| 2000/01 | ||||||
| Cost |
600 | |||||
| FYA(40%) |
240 |
240 |
||||
| WDA(25%) |
1,350 | (x 80% = 1,080) |
180 | (x 95% = 171) |
1,251 |
|
| Residual value |
4,050 |
540 |
360 | |||
Note that:
- the motor car does not qualify for a first year allowance (see EIM36620),and will not qualify for capital allowances at all after 5 April 2002. As regards the transitional arrangements that apply for 2001/02 only, see SE36791
- the residual value to carry forward is calculated by deducting the full 25% writing down allowance (or first year allowance at the appropriate rate), before making any adjustment for private use.
