The Alphard Is in Your Name. Can Your Sdn Bhd Still Claim It?

01The Alphard Is in Your Name. Can Your Sdn Bhd Still Claim It?

The vehicle card says your name. The instalments come from the company. Here is how LHDN decides who gets the capital allowance.

You walk into the showroom. The salesperson slides the HP form across the table.

"Company name or personal name, boss?"

You think about it. Personal name feels simpler. The car feels like yours.

So the Alphard goes in your name. But the company pays the monthly instalment. The company pays the petrol. The company pays the insurance.

On Monday, it fetches a client from Senai Airport. On Saturday, it takes the family to Desaru.

At year end, your accountant asks: "Why is the company claiming capital allowance on a car it does not own?"

The answer sits in one Public Ruling.

021. Two kinds of owner

LHDN explains ownership for capital allowance purposes in Public Ruling No. 5/2014, Ownership and Use of Asset for the Purpose of Claiming Capital Allowances, read with Schedule 3 of the ITA 1967.

Start with the basic rule. Capital allowance is only given to the person who incurred the qualifying expenditure on an asset used in his business.

The ruling then recognises two kinds of owner. Ownership means legal or beneficial ownership, and one person can be either or both.

The legal owner is the name on paper. For a motor vehicle, it is the person whose name is on the vehicle card. In your case, that is you.

The beneficial owner is whoever actually paid. The ruling defines the beneficial owner as the person who actually incurred the QE and payment, provable in the books with invoices, vouchers and receipts.

So the name on the geran is not the end of the story. It is only the start.

032. Can the Sdn Bhd claim? LHDN's own example says yes

The ruling answers this directly. If a beneficial owner has incurred the QE and used the asset in its business, it can claim capital allowance even though the asset is registered in another person's name.

Example 2 in the ruling could have been written for you. Akmal buys a lorry and registers it in his brother Ahmad's name. Akmal pays the instalments and uses the lorry in his business. Akmal claims the capital allowance. Ahmad, whose name is on the vehicle card, claims nothing because he incurred no QE.

Replace Akmal with your Sdn Bhd and Ahmad with yourself. That is your Alphard.

But the ruling cuts both ways. In Example 6, a company is the legal owner and uses the lorry, but its holding company pays the instalments. The legal owner gets no capital allowance, because it did not incur the QE.

So the test is simple to state and hard to fake. Whose bank account paid? Whose business does the car serve? If the answer to both is the company, the company claims.

And you personally cannot fall back on the capital allowance. The ruling denies capital allowance on an asset used for employment purposes or personal purposes. Capital allowance is set against business income, not your director's salary.

043. The hire purchase wrinkle

Most Alphards are bought on HP. Under the ruling, the hirer is deemed the owner of the asset and is the beneficial owner as he has incurred the QE, becoming the legal owner as well once the last instalment is paid.

Here is the tension. If the HP agreement is in your personal name, you are the hirer on paper. Example 2 supports the company where it genuinely pays, but the ruling does not specifically address an HP signed by one person and serviced by another.

Expect LHDN to ask for evidence. The weaker the paper trail, the harder the claim.

Two HP mechanics to get right:

• The QE is only what has actually been paid. Capital allowance is computed on capital instalments actually paid for the year, not on the amounts in the HP schedule.
• The deposit and capital repayments are QE, while HP interest is deducted against gross income. Initial allowance is based on QE incurred each year, and annual allowance on the cumulative QE.

4. The cap still applies

Even when the company qualifies as beneficial owner, the passenger car restriction does not go away. Under paragraph 5.2(b) of Public Ruling No. 6/2015, qualifying expenditure on a non-commercial car is restricted:

• RM100,000, if the car is new and costs RM150,000 or less.
• RM50,000, in every other case, including reconditioned cars.

Illustration, assuming a cash purchase and full business use:

• Cost of Alphard: RM450,000
• Qualifying expenditure (capped): RM50,000
• Year 1 capital allowance (IA 20% + AA 20%): RM20,000
• Total capital allowance over the life of the claim: RM50,000

On HP, the same RM50,000 ceiling is reached progressively as capital instalments are paid, rather than in the first year.

Your company spends RM450,000. The tax system recognises RM50,000.

055. Running costs: petrol, maintenance, insurance, road tax

The general test is Section 33(1). An expense is deductible if it is wholly and exclusively incurred in the production of gross income. Section 39(1)(a) disallows domestic or private expenses.

Road tax, insurance and HP interest are not part of the capital allowance claim. They are recurring expenses claimed under Section 33, subject to the same business use test.

And that special number plate? The reserve price for a vehicle registration number is a private expense, prohibited under Section 39.

When the car is in your personal name, LHDN looks harder at every receipt. Insurance and road tax in your name, paid by the company, can look like the company settling your personal bills.

066. Private use and your personal tax

Ownership does not cure private use. The full capital allowance is available only if the car is used wholly and exclusively for business. Where it is also used privately, only a portion is claimable, and apportionment is usually done on a time basis.

LHDN's own illustration, Example 27: Hassan buys a RM140,000 car used for business and private purposes. Because it is not licensed as a commercial vehicle, his QE is capped at RM100,000. His business use is two thirds, so he claims two thirds of the capital allowance.

Keep a log either way. Whatever basis you use, you need records to defend it. The ruling requires capital allowance schedules and records to be kept for LHDN audit.

Then there is your side of the ledger. In practice, two routes:

Route A: Apportion. The company claims only the business portion of capital allowance and running costs. The private portion is disallowed.

Route B: Tax the private use in your hands. Where the company is the beneficial owner and provides the car to you, the private use is a benefit in kind, taxed as employment income under Section 13(1)(b) and explained in Public Ruling No. 11/2019. For a car, the formula method is cost divided by 8 years, times 80%, and under the prescribed value method a car more than 5 years old can have its value halved.

But if LHDN concludes the car is really yours and the company is simply paying your bills, the payments may instead be taxed as a perquisite under Section 13(1)(a), on the full amount. The ownership question decides which.

What you cannot do is neither. Company claims everything, you declare nothing, and the car sits in your name. That combination is an audit waiting to happen.

077. Practical checklist

• Pay the deposit and every instalment from the company's bank account, never your personal account.
• Record the car in the company's fixed asset register, with a board resolution explaining why it is held in your name.
• Do not have the company guarantee or secure your personal HP. Check the Companies Act position with your company secretary first.
• Keep the HP agreement, purchase invoice, and payment trail together. The ruling's test is payment provable in the books.
• Claim capital allowance on capital actually paid each year, within the capped QE. Claim HP interest separately.
• Keep a usage log and apportion for private use.
• Decide Route A or Route B, and apply it consistently every year.
• Think ahead. If the car is later transferred into the company's name, or sold, plan for the stamp duty and balancing adjustment consequences.

08KTP's View

Registering the Alphard in your own name is common. It is not automatically fatal to the company's claim.

Public Ruling No. 5/2014 looks past the vehicle card to two questions: who paid, and whose business the car serves. LHDN's own Akmal example shows that if the answer to both is your Sdn Bhd, the company can stand as beneficial owner.

But the burden of proof is on you. A car in your name, on an HP in your name, paid by the company, driven to Desaru on weekends, is exactly the fact pattern LHDN is trained to question. Add a company guarantee on your HP, and the Companies Act joins the conversation.

If you have not bought the car yet, ask whether the convenience of your name on the geran is worth the paperwork it creates. If you already have, fix the paper trail now, before the audit letter arrives.