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Drive a hard tax bargain IF YOU receive a car allowance as part of your salary you should note the different tax advantages of the various car finance options, advises Ernest Mazansky, tax partner of Kessel Feinstein. Under an instalment sale agreement you can claim the finance charges as you incur them. The cash cost of the car (including VAT) can be depreciated over five years. These write-offs will be proportionate to the business mileage you have travelled in the tax year. Under a lease or rental contract you claim the business travel portion of the actual instalments paid against the car allowance you have received. In your annual tax return, when apportioning the cost of your car to business travel, you can either use actual costs or, if you haven't kept records, the costs set out in the taxman's tables. Mazansky says it pays to keep records and claim actual costs. "Ninety-nine times out of 100 you will get a better result claiming actual costs even if you don't do a high business mileage. This is especially so during the period of the lease or instalment sale when you have interest and depreciation write-offs. Once the car has been written off after five years, it may pay to use deemed business costs." Top of page | Home Page | News | BT Money | Survey | Companies | People | Appointments | World | Markets | Trends | Columns | News Maker | Money Guides | Labour Guides | Calculators | Search | Archive | E-Mail us |