Capital allowances on a golf buggy

Why the purchase is not simply an expense

Buy a set of tyres and the cost goes through the accounts as an expense of the period. Buy the buggy those tyres are fitted to and it does not, because the machine will work for years rather than being consumed within one. Tax law draws a line between revenue and capital spending, and relief on the capital side arrives through capital allowances rather than as a straight deduction against the profits of the year you paid.

The practical effect is that relief on a buggy purchase is spread rather than immediate, and the shape of that spreading is set by which category the machine falls into and by the rules in force for the period in which you bought it. Those rules move about. That is not a reason to ignore them, but it is a good reason not to take a figure from a page written in a different tax year and assume it still holds.

Plant and machinery, and what the category is for

Most business equipment falls into the plant and machinery category, which is the general home for the tools a business uses to do its work, as opposed to the stock it sells or the building it works in. A buggy carrying greenkeepers, kit or guests around a site is doing exactly the sort of job that category exists to cover, and in that respect it is no more exotic than a mower or a compressor.

Being in that category does not by itself tell you how much relief you get or when you get it. It tells you which set of rules applies. Within the category there are different treatments, and vehicles are the part of the system where the treatment most often diverges from what an owner assumes it will be. That divergence is precisely why this subject needs an accountant rather than a rule of thumb from the trade.

It is also why the description of the machine matters more than its price. A load-bed utility vehicle, a two-seat golf buggy and a multi-seat people carrier can be bought from the same supplier in the same week and are not obviously the same thing for this purpose. The maker's own description of what the vehicle is and what it is built to do is the document your accountant will want to see.

The car definition, and why it is not the everyday one

Tax law carries its own definition of a car, and it exists to separate ordinary business equipment from vehicles generally suited to carrying people privately. The definition turns on how a vehicle is constructed and what it is suited for, not on what it is called, where it is driven or whether it could ever be registered for a road. Vehicles falling inside it are treated differently from other plant, and the difference is not trivial.

Where a buggy sits against that definition depends on the machine in front of you. The specification is what the question gets answered from, so bring the maker's description rather than a paraphrase from a listing and let the classification be decided on the actual vehicle. A seller who assures you of the answer is guessing, however confidently, because they are not the person who will have to defend the treatment.

What decides the answer in your case

There is no single answer to hand out, and anybody offering one has not asked enough questions. The variables that genuinely move the treatment are few, and you can gather all of them before the first meeting so the conversation is short and the advice is specific. Having them written down also stops the answer being given on an assumption that nobody stated aloud, which is the usual way advice turns out to have been about somebody else's business.

The last item on the list below matters more than it sounds. Reliefs available in one period are not necessarily available in the next, because allowances are altered at Budgets and the changes take effect from dates that rarely line up neatly with a business year. The timing of a purchase near a year end is occasionally worth a short conversation of its own, and it costs nothing to have it before the order goes in.

• What the vehicle is, in the maker's own description rather than in trade shorthand.
• Who is buying: a sole trader, a partnership or a limited company.
• What the machine is used for, and how much of that use is business use.
• How the purchase was funded: cash, hire purchase or a lease.
• The accounting period in which the buggy was brought into use.

How you paid for it changes the treatment

Buying outright and buying on hire purchase generally sit in the same place for this purpose. The business is treated as acquiring the asset and the allowances follow, usually from the point the machine is brought into use rather than from the date of the first payment. The interest element of the agreement is dealt with separately from the cost of the buggy itself, which is one of several reasons the finance paperwork needs to be kept in full.

A lease under which you never own the machine is a different animal. The rentals are generally a cost of the period and there is no asset in your accounts to claim allowances against. That is not better or worse, simply different, and it is one of the honest reasons a business picks one funding route over another. The wording of the agreement decides which case you are in, so your accountant needs to read it rather than hear it described over the phone.

Private use, and the difference between a trader and a company

Where a sole trader or a partner uses a machine privately as well as for the business, the claim is generally restricted to reflect that, and the restriction is based on the actual split rather than on a convenient one. A log kept from the beginning settles the question quietly and in the background. A log reconstructed three years later under enquiry does not, and the person asking will know which sort they are looking at.

A company works differently. The company owns the asset and claims in its own right, but making that asset available to a director or an employee for private use carries consequences of its own on the employment tax side. Those are two separate questions and they get confused constantly, usually by people hoping the second one goes away. Our guide to buying through a limited company deals with it in more detail.

What happens when the buggy leaves the business

Relief is a timing arrangement rather than a gift, and the system squares up when the asset goes. Selling, scrapping or taking a machine out of the business brings the disposal into the calculation, and the broad effect is to true up the relief you have had against what the buggy actually cost you across its working life. Sell it for more than the written down figure and some of that relief comes back.

The practical points are ordinary bookkeeping. Record what the machine went for and to whom, keep the invoice or the scrap note, and tell your accountant in the period it happened rather than a year later when the paperwork has gone. Where a director buys a machine out of a company, the value used has to be a real one, and that is a transaction your accountant will want to be comfortable with before it takes place.

The records a claim rests on

A claim is only as good as the paperwork behind it, and that paperwork is trivial to keep at the time and awkward to assemble afterwards. Keep it with the machine's service file rather than in a separate accounting folder, because the service file is where somebody will actually look for it in three years. The list is short and none of it takes any real effort at the point the buggy arrives on site.

Serial numbers are the part people skip and the part that saves the most bother. A fleet of similar machines bought over several years becomes very hard to match to invoices without them, and a claim, a disposal or an enquiry all depend on knowing which buggy is which. Write the number on the invoice when the machine arrives, before it is parked with the others and everybody stops being able to tell them apart.

• The purchase invoice, naming the business and identifying the machine by serial number.
• The finance or hire purchase agreement in full, where one exists.
• The date the buggy was first brought into use, which is not always the date it arrived.
• A record of business and private use where the machine does both.
• The disposal paperwork when it eventually leaves, scrap notes included.

Why this guide carries no numbers

Allowances, thresholds and the treatment of particular assets are altered at Budgets, sometimes substantially and sometimes with effect from a date part way through a business year. A page stating a rate is accurate on the day it is published and quietly wrong afterwards, while continuing to appear in search results and continuing to be believed by people who have no way of telling. We would rather be useful for longer than precise for a fortnight.

So what is on offer here is the shape of the thing: what capital allowances are for, which questions decide your case, and what to have ready before you ask them. The current position comes from HMRC guidance and from your accountant, who is the only person able to apply it to your business. For our part of it, ask us for the specification and the invoice detail, and you will get those exactly.

Common questions

Can I claim capital allowances on a golf buggy?

Where the machine is bought for business use, relief on the cost is normally available in some form, because a buggy is business equipment rather than stock or premises. What form it takes, and how much falls in the first year, depends on the classification of the vehicle and on the rules in force for that accounting period. Take the specification and the invoice to your accountant.

Is a golf buggy plant or a car for tax?

It depends on the machine, and the question is settled by a definition in tax law rather than by what the trade calls it. Construction and suitability for carrying people are what the definition turns on, so a two-seat golf buggy and a load-bed utility vehicle may not land in the same place. Get it decided on the actual specification instead of assuming.

Can I claim if I bought the buggy on hire purchase?

Generally yes, because a hire purchase agreement is treated as acquiring the asset rather than renting it, though relief usually starts when the machine is brought into use rather than when the agreement is signed. The interest element is handled separately from the cost. Give your accountant the agreement itself, since the wording is what decides the treatment.

What if I use the buggy privately as well?

Say so, and keep a record of the split. For a sole trader or a partnership the claim is generally restricted to the business proportion of the use. For a company the position differs: the company claims in its own right, and the private use surfaces as an employment tax question instead. Either way, a simple log kept at the time supports the figure.

Do I have to pay something back if I sell the buggy?

Not a repayment as such, but the disposal comes into the calculation and can claw relief back where the machine sold for more than its written down value. That is the system working as designed: relief is spread across the life of the asset and squared up at the end of it. Keep the sale paperwork and pass it on in the right period.

Can a golf club claim capital allowances on its buggy fleet?

It depends on how the club is constituted and how it is taxed, which varies between clubs more than most members would guess. A proprietary club run as a trading company sits in a different position from a members club. The buggies themselves are ordinary business equipment; the complexity lives in the entity rather than the machine. Put it to the club's own accountant.