An explanation of Capital Allowances for Car Mechanics and Auto Technicians.
The regulations covering this area are known as EIM50700 to Tax Office employees. Whilst the capital allowance rules for car mechanics and auto technicians are the same as for employees in other sectors, you may also be able to get extra tax relief under the rule S336 ITEPA 2003.
Flat Rate Expenses for mechanics
As an auto technician or car mechanic you can claim the applicable flat rate expense amount.
S336 ITEPA 2003
This rule covers you if your costs are more than the flat rate amount and are also “insubstantial expenditure on things like tools”. There is a separate set of regulations to help us with an exact definition.
Capital Allowances for tools
If your expenses meet the criteria for the 2 year test then you will be eligible for PMAs – Plant and Machinery Allowances. The most important element of this that the amount you pay out is entirely or partially for the ‘purposes of the qualifying activity’ (your work) and that you then own the plant and machinery.
If your role, or ‘qualifying activity’, is in employment or holding an office then this expenditure only qualifies if it also satisfies the criteria that it is “necessarily provided for use in the performance of duties”.
Reasons why your capital allowances claims might be refused
- The item is not used in the performance of your duties.
- The money was not actually spent.
- It is deemed to be an unnecessary expense. This conclusion is usually reached because an employer either did provide, or would have provided the necessary equipment.
Important changes to the CA’s code
On 6th April 2008, three major changes to the CA’s code were put in place.
- Annual Investment Allowance
This is a 100% allowance for business expenditure in the first year of trading on nearly all machinery or plant, excluding cars.
The current AIA figure stands at £250,000 per year and applies to any such costs from January 2013 for two years.
This allowance can only be applied to expenditure within the given time period. It does not include ‘historic’ payments or assets that you previously had for non-qualifying reasons that you are starting to use for work. That means equipment you owned whilst self-employed or presents you received.
- Small Pools Allowance
This is probably a relevant allowance for most motor mechanics claims. It means that you can claim either a normal WDA or a small pools writing down allowance, if it doesn’t exceed £1,000.
- WDA
This can still be claimed in the same way.
Expensive Tool Boxes
If you buy an expensive tool box it is not considered appropriate to argue that you could have ‘made do’ with cheaper. The ‘necessity test’ is not relevant to equipment costs.
Time Limits for making a claim
A claim can be accepted for the previous four tax years only. However if a tool is still in use which was bought before the previous four tax years the purchase is still eligible for tax relief and can be claimed by using it as a brought forward figure in the capital allowance calculation.
