Taxi Capital Allowances UK: Can a Company Claim on a Director-Owned Car?
Taxi businesses in the UK are often operated through a limited company, but the practical setup does not always align with the legal ownership of assets. One of the most common questions advisers see is whether a company can claim capital allowances on a taxi car that is owned personally by the director, even though all taxi income is taxed through the company.
This guide explains the HMRC position on taxi capital allowances, how ownership affects claims, and what options are available to stay compliant while remaining tax efficient.
Read our full guide to capital allowances in the UK to understand how relief works across different types of assets.
HMRC Rules on Capital Allowances for Cars
HMRC applies a fundamental rule when it comes to capital allowances:
Capital allowances are only available to the business that incurs the capital expenditure and owns the asset used in the trade.
This rule applies regardless of whether the asset is used exclusively for business or generates company income. Use alone is not sufficient — legal ownership and who paid for the asset are decisive.
For a deeper breakdown, see our article on capital allowances for cars in the UK, including CO₂-based rates.
Taxi Business Structures and Car Ownership
In practice, many taxi companies operate with the following arrangement:
- The limited company receives and declares all taxi income
- The director personally owns the taxi vehicle
- The car is used mainly or entirely for taxi work
While commercially common, this structure creates a clear distinction for tax purposes between the company and the director as an individual.
Can a Company Claim Capital Allowances on a Director-Owned Taxi Car?
The HMRC-Compliant Answer
No. A limited company cannot claim capital allowances on a taxi car that is legally owned by the director.
This is because:
- The company has not incurred qualifying capital expenditure
- The vehicle is not a company-owned asset
- The car does not appear on the company balance sheet
This position remains unchanged even where the director is the sole shareholder or the car is used exclusively for company taxi work.
For company car taxi tax purposes, HMRC looks at ownership first, not commercial convenience.
Why Taxi Cars Are Treated as Cars for Tax
Even when used as private hire vehicles or hackney carriages, taxis are treated as cars for capital allowance purposes. This means:
- They do not qualify for the Annual Investment Allowance
- Relief is based on CO₂ emissions
- Ownership rules are strictly applied
When Capital Allowances Are Available
Company-Owned Taxi Cars
If the limited company purchases the taxi car directly, or the car is transferred into company ownership, capital allowances become available under the standard car rules.
Depending on emissions, the company may claim:
- 100% first-year allowance for qualifying new zero-emission cars
- Writing down allowances at the applicable rate for other cars
Where the director has private use of the vehicle, a benefit-in-kind charge may arise, but this does not prevent capital allowance claims.
You may also find our company car benefit-in-kind guide helpful when considering director use.
What Can Be Claimed If the Car Stays in the Director’s Name?
Although capital allowances are not available, the company can still obtain corporation tax relief in other compliant ways.
Mileage Allowance Payments
The company may reimburse the director using HMRC approved mileage rates for business journeys. These payments are deductible for corporation tax and are not taxable on the director when within HMRC limits.
Reimbursement of Business Expenses
Alternatively, the company can reimburse actual running costs such as fuel, insurance, servicing and licensing fees, restricted to the business proportion of use.
Transferring the Car to the Company
The director may choose to transfer the vehicle to the company at market value. This can allow capital allowances going forward but must be reviewed carefully due to VAT, benefit-in-kind and valuation implications.
Common HMRC Errors and Risk Areas
HMRC frequently challenges situations where:
- Capital allowances are claimed on personally owned taxi cars
- The vehicle is not recorded as a company asset
- There is no formal transfer or lease agreement
These issues can result in disallowed claims, additional corporation tax, penalties and interest.
Summary: Taxi Capital Allowances UK
- A company cannot claim capital allowances on a director-owned taxi car
- Ownership is essential for capital allowance entitlement
- Mileage and expense reimbursements remain allowable alternatives
- Company ownership opens access to capital allowances but increases compliance considerations
Getting the ownership structure right is critical for company car taxi tax planning and HMRC compliance.
Visit our tax advice for taxi drivers page for tailored guidance.
```Frequently Asked Questions: Taxi Capital Allowances UK
Can a taxi company claim capital allowances if the director owns the car?
No. HMRC requires the company to own the vehicle and incur the expenditure. Director ownership prevents a capital allowance claim.
Does private use stop capital allowance claims?
No. Private use may trigger a benefit-in-kind charge, but it does not block capital allowances where the company owns the car.
Are electric taxi cars treated differently?
New zero-emission cars purchased by the company may qualify for 100% first-year allowances, subject to current HMRC rules.
Featured Snippet Summary
Taxi capital allowances UK: A limited company can only claim capital allowances on a taxi car if it owns the vehicle. Cars owned personally by directors do not qualify, even when used entirely for company taxi work.