New car for myself

There are a number of options that you can choose to maximise tax reliefs claimed back on cars bought for a small company.  

For example, you could consider buying a low emissions vehicle, which allows for 20% of the VAT on the purchase to be claimed back if the vehicle will be used for business at least 60% of the time.  What qualifies as low emissions is specifically defined on the Revenue commissioner’s website but it is essentially any motor vehicle with a level of CO₂ emissions of less than 156g/km and provided the car is first registered after 1^st January 2009. It is important to check when buying a new car that it will qualify.

When buying a car for business use, an annual capital allowance can be claimed back over 8 years, and this is based on the actual cost of the car, though there is a limit to how much you can claim, which you should take into consideration when looking at a budget for your car.

The maximum cost of a car that can be claimed back as capital allowance is restricted to €24,000.  So let’s say the car you buy costs €30,000 the capital allowances would be €24,000 * 12.5% = €3,000 for the next eight years.

There is also a restriction on the amount of capital allowance you can claim back if the car’s emissions are seen as too high. For cars purchased after the 1^st July 2008, the allowable cost is further restricted if the carbon dioxide emissions exceed 155 g/km. For cars with emissions between 156 g/km and 190 g/km the capital allowances are reduced by 50%.  For cars with emissions in excess of 190 g/km no capital allowances are available. 

It should also be noted that no VAT can be reclaimed on petrol but VAT can be reclaimed on Diesel, so if your business is VAT registered, buying a diesel car could work out as a better option.

There are lots of other things to consider when buying a new vehicle such as the benefit in kind implications, income tax upshots and the finance of the purchase, but your local TaxAssist Accountant can assist you with your decision.

Date published 7 Feb 2014

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.