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Dear Tax Tutor,
I have question from example 7 of chapter 5.
With regards to the ‘Business car use 1’ and ‘Business car use 2’, why is there a difference in treating them in the answer?
With the first car, we took the full amount i.e. balancing allowance and then applied the percentage but with the car 2, we first WDA and then took the percentage.
I’m a bit confused, can you kindly explain it to me?Peace be upon you.
Hi soruh the first car was sold during the accounting period and therefore a balancing allowance arose as it was sold for less than the tax wdv brought forward at the start of the accounting period. The balancing allowance is then restricted to the business use percentage.
Car 2 was purchased during the accounting period and is still owned at the end of the accounting period and is therefore eligible for WDA which is again correctly restricted to the business use percentage.
A balancing adjustment only arises when the non pool asset is sold during the accounting period.
Car 2 of course ranks for just 8% WDA as its CO2 emissions are above 160g/km.
Whether claiming a WDA or a balncing allowance we always restrict the claim to the business use percentage.
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