SE36935 - Deductions from emoluments: capital allowances: example: special rule for calculating balancing allowances on motor vehicles and bicycles

For a description of this adjustment see SE36790. Note that the special rule only applies to balancing allowances. Balancing charges on motor vehicles and bicycles are calculated in the same way as for other assets (see SE36680 and example SE36930). But see SE36791 regarding the transitional arrangements that apply for 2001/02.

On 28 February 1998 an employee in continuing employment, and earning over £8500 per annum, buys a motor car which she then uses in the performance of her duties. The car cost £9800. The employer pays a mileage allowance for business mileage. Private use of the car is 60% throughout.

In 1997/98 the employee claims capital allowances and a deduction for motor running expenses using the strict statutory basis. The capital allowance figures are:

The employer operates a Fixed Profit Car Scheme. In 1998/99, 1999/00 and 2000/01 the profit element in the employee’s mileage allowance is calculated under the FPCS, so no capital allowances can be claimed (see SE36780).

On 5 June 2001 the employee sells the car for £3000. She opts out of the FPCS for 2001/02 and claims a balancing allowance for that year. The allowance is calculated as follows:

Years for which capital allowances were claimed = 2

Years for which capital allowances could have been claimed = 5*

(* treating part years as whole years)

Note that as the car was actually sold in 2001/02 the employee does not have the option of claiming a writing down allowance for that year (see SE36791).