If you are a sole trader, your passenger car may be included in your business assets. It is often not possible to change this decision retrospectively.
Asset labelling
A passenger car is usually classified as optional assets. This is because the car is used for both business and private journeys. Even minimal private use is sufficient to allow you to opt to treat the car as private assets. Conversely, if there is any business use, the car may be classified as business assets. In that case, you must, however, include a flat-rate addition to your taxable profit in respect of the private use.
You must make this choice when purchasing the car. After that, you may only revise your choice in the event of (very) exceptional circumstances. This was discovered by the owner of an Audi S8 Quattro, who, in December 2012, wanted to transfer the car he had bought in May 2012 to his private assets at a book loss. In 2013, he traded in the car for a new S8.
Arnhem-Leeuwarden Court of Appeal has ruled that the book loss may not be claimed. The man has not demonstrated that the car was used solely for private journeys from December 2012 onwards. If that were the case, the car would no longer qualify as optional assets, but as compulsory private assets.
The burden of proof that the car has become a private asset rests, of course, with the business owner. In the aforementioned case, the business owner has not provided a logbook and has not, in a verifiable manner, provided insight into the actual use of the car. He has only specified the purposes for which approximately half of the kilometres driven in the car were travelled, including a holiday trip.
The Court also notes that, in the past, the business owner always had a car on his balance sheet. He is once again using the new car for business purposes and counts it as part of his business assets. According to the Court, these circumstances also indicate that the business will have used the car for business purposes.
BV
Do you run your business as a private limited company (BV)? If so, you may choose to transfer the car from your business assets to your private assets. This is because, in legal terms, the private limited company and its (managing) director or major shareholder are two separate entities. The private limited company may decide to sell the car, for example to its director or shareholder.