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#1 Saturday 20th September 2014 16:08:01

christhedrummer
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Registered: Wednesday 18th October 2006
Posts: 1,163
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Car written off, tax situation

It looks like my car will be written off having been hit from behind pretty hard.

What is the tax situation with the money I will get for the car. Is it classed as an income as it is in return for an asset or is it in a different section and exempt from tax?

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Saturday 20th September 2014 16:08:01

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Re: Car written off, tax situation



#2 Saturday 20th September 2014 19:21:44

kaf
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From: Wiltshire
Registered: Sunday 5th August 2007
Posts: 3,330
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Re: Car written off, tax situation

I believe it will be monies received upon sale of the vehicle. The vehicle is actually sold to the insurance company.
Treat it exactly as you would if you sold it to anyone else.

Last edited by kaf (Saturday 20th September 2014 19:23:35)

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#3 Monday 22nd September 2014 16:31:27

AUTAX
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Registered: Friday 22nd July 2011
Posts: 1,032

Re: Car written off, tax situation

I had a car written off in February. Cost me in real terms £9,000.

£2,500 to settle finance on written off car and £6,500 to buy another.

Not sure whether the taxman wants a cut but it's still a bitter pill to swallow.

I don't think the money received is taxable. It's not unearned income.


Be Fear-less, go GEAR-LESS!

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#4 Monday 22nd September 2014 18:51:33

MGM
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From: Surrey
Registered: Monday 24th October 2011
Posts: 861

Re: Car written off, tax situation

AUTAX wrote:

I had a car written off in February. Cost me in real terms £9,000.

£2,500 to settle finance on written off car and £6,500 to buy another.

Not sure whether the taxman wants a cut but it's still a bitter pill to swallow.

I don't think the money received is taxable. It's not unearned income.

I'm not sure what "in real terms" means!

You had an asset of £6,500 cash which you've exchanged for another asset, a car, which (at least on the day) was worth the same. The £6.500 hasn't disappeared. No profit or loss involved.

However the car obviously depreciates, and that represents a business expense which can be claimed (subject to the HMRC rules).

Whether some of the money received for the old car is taxable depends on whether it exceeds the written-down value of the car. As Kaf has said, treat it as if you'd sold it.

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#5 Monday 22nd September 2014 19:16:05

pegasus
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From: north west
Registered: Friday 25th February 2005
Posts: 3,323

Re: Car written off, tax situation

Hi
Doesn't it depend on which tax accounting method has been used.
Did you use the mileage system or the revenue costs  and capital expenditure system.

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#6 Monday 22nd September 2014 19:43:05

kaf
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From: Wiltshire
Registered: Sunday 5th August 2007
Posts: 3,330
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Re: Car written off, tax situation

Indeed it does depend on that, because it would be irrelevant if using the mileage claim method.

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#7 Monday 22nd September 2014 20:11:30

AUTAX
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Registered: Friday 22nd July 2011
Posts: 1,032

Re: Car written off, tax situation

Look, it all depends on whether I had £9,000 at my disposal to finance another car.
If I hadn't had money on a bank account to cover this and if I couldn't get credit for
for what ever reason then I would go out of business.

Sometimes people can be so obtuse.

Sorry to hear of your bad luck Chris. In order to replace his vehicle he will have to find
a few more thousand which he may or may not find easy to do.

The Mercedes that hit me had damage to the front bumper. Probably got repaired under his insurance
and his annual premium would probably have risen maybe a couple of hundred pounds for 2-3 years.

That's the real cost and in real terms I will be worse off than I was before because the car I had before
being clobbered was working perfectly fine and earning me a good living just like Chris's was. In real terms
it is us two that are heavily out of pocket not the numpties that hit us.


Be Fear-less, go GEAR-LESS!

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#8 Monday 22nd September 2014 20:31:03

Roadmaster
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Registered: Thursday 4th March 2004
Posts: 5,680

Re: Car written off, tax situation

If you use the mileage system you can only claim for the interest on the finance I think.

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#9 Monday 22nd September 2014 20:48:10

MGM
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From: Surrey
Registered: Monday 24th October 2011
Posts: 861

Re: Car written off, tax situation

AUTAX wrote:

Look, it all depends on whether I had £9,000 at my disposal to finance another car.
If I hadn't had money on a bank account to cover this and if I couldn't get credit for
for what ever reason then I would go out of business.

Sometimes people can be so obtuse.

Sorry to hear of your bad luck Chris. In order to replace his vehicle he will have to find
a few more thousand which he may or may not find easy to do.

The Mercedes that hit me had damage to the front bumper. Probably got repaired under his insurance
and his annual premium would probably have risen maybe a couple of hundred pounds for 2-3 years.

That's the real cost and in real terms I will be worse off than I was before because the car I had before
being clobbered was working perfectly fine and earning me a good living just like Chris's was. In real terms
it is us two that are heavily out of pocket not the numpties that hit us.

I agree with all of that, and I've been through a number of collisions where I've ended up out of pocket

However - and I wasn't being obtuse - the original question was about the tax angle.

HMRC are only interested in what can be counted as business income/expenditure, within the rules. If you hadn't had the £9,000 and had gone out of business, they wouldn't care, so long as your tax affairs were in order.

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#10 Monday 22nd September 2014 21:19:51

christhedrummer
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Registered: Wednesday 18th October 2006
Posts: 1,163
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Re: Car written off, tax situation

Thanks for all the replies. finally Had time for a chat with Hmrc today.

If you claimed original cost as capital asset then write off value is classed as income so is taxable.

The shortfall between what I'll get back and what I'm looking to spend is probably about 1500 quid. I would have been looking to change cars in a year or so, this has just brought it forward. Just a slightly more complicated tax return next year!

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