I have a client, a Sole Trader, who wishes to purchase a motor vehicle under a Personal Contract Plan (PCP) or under a HP agreement. He basically wants to know how each of these options would be treated for tax purposes.
1. PCP Plan: Under this scheme the purchaser pays a deposit followed by 36 monthly payments and then makes a final payment of referred to as a “Balloon Payment”, hands back the car or gets a new car and starts another 3 year agreement.
The query is how will the 36 monthly paymts be treated for tax purposes? Will he be entitled to Wear & Tear on the car, which he will not own until be makes the final payment.
2. HP Agreement: Under this method I believe he can claim the HP Charges in the P & L Account and also claim Wear & Tear on the car at 12.5% S.L. up to a limit of €24K. Is this correct?