Having a personalised number plate on your car can gain a lot of attention when you're on the road. However, when you're claiming tax relief on a personalised number plate you need to understand the tax rules. This article will tell you what you need to know and how to avoid the pitfalls.
Overview
If you're claiming tax relief on a personalised numberplate it must be wholly and exclusively for business use. That’s the golden rule. Therefore, if it promotes your business name—like "CAKE 123" for a bakery —then there’s a compelling argument.
HMRC's view on personal number plates
HMRC's view the purchase of a personalised numberplate as an item of capital expenditure. However, they do not accept that capital allowances can be claimed on the purchase of a personalised numberplate as they consider it to be an intangible asset. Therefore claiming tax relief on a personalised numberplate under the capital allowances regime is a non-starter.
Personalised numberplates - position for companies
When your company acquires a personalised number plate the key points to consider are as follows:
Director's tax treatment
If you use a company car fitted with a personalised number plate you are unlikely to incur an additional tax charge. This is because HMRC consider the number plate is included in the price of the car used to calculate the company car benefit tax charge. Furthermore HMRC perceive the value lies in the right to use a particular registration mark not the numberplate itself. This right is separate from the price of the plate itself.
However, where you company pays for a personalised number plate to be fitted to a car owned by you personally, a tax charge will apply.
Personalised numberplates - position for sole traders and partnership
For sole traders and partnerships, the rules are even more restricted. This is because there is no legal distinction between business and personal ownership - unlike a company. This means it’s much harder to claim tax relief on a personalised number plate.
Therefore you must clearly prove the plate is used only for business purpose. This may be difficult In practice, this unless the plate is tied to a trade name. Additionally, it will need to be displayed on a dedicated work vehicle.
VAT treatment of a personalised numberplate
If your business is VAT-registered, VAT can potentially be reclaimed on the purchase. Although in most cases, this is unlikely. This is because HMRC will not permit VAT recovery unless you can prove 100% business use. This is very difficult if your car is used for commuting or personal travel.
Capital Gains Tax treatment
A sale of a personalised numberplate will potentially give rise to a capital gain under the chattels rules. Although the tax treatment may differ depending on whether the numberplate is sold separately from the car.
Summary
Claiming tax relief on a personalised number plate is possible, although only with the right approach. What's more when it's used on a company car, it brings extra complications. Therefore, you must consider ownership, business use, capital treatment, and potential benefit in kind charges.
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