Car Purchase y Company Where It Shows On The Balance Sheet
Discussion
The header of the thread does not mention the word tax at all. I thought you were asking about how the vehicle would be accounted for and shown in the business accounts
Company cars are not great from a taxation point of view - full stop - unless the car is a brand new low emission vehicle or classified as a commercial vehicle.
Ignoring the poor allowances and high Benefits in Kind associated specifically with "normal" motor cars, the general rules regarding assets and Capital Allowances are -
Buy outright - post asset to balance sheet in accounts as a Fixed Asset and claim Capital Allowances in tax computation
Buy on loan - post asset to balance sheet in the accounts and claim the Capital Allowances in the tax computation.
The loan is shown as a liability in the balance sheet.
The loan repayments go against the loan and the loan interest goes to the profit and loss account as an expense.
Buy on HP - post asset to balance sheet in the accounts and claim Capital Allowances in the tax computation.
The HP account is shown as a liability in the balance sheet.
The HP repayments go against the HP account and the HP charges and interest goes to the profit and loss account as an expense.
Acquire on a Lease Finance deal (Finance Lease) - post to balance sheet in accounts but DO NOT claim Capital Allowances in tax computation.
The business CANNOT claim Capital Allowances because the asset is still owned by the leasing company and THEY will be claiming the Capital Allowances on the asset.
The lease finance liability account is shown as a liability in the balance sheet. YOUR business is allowed to offset against the taxable profits of the business the depreciation charged each year on the vehicle. Normally, HMRC does not allow "depreciation" as a tax deductible cost - substituting Capital Allowances instead.
Rent Vehicle (Operational Lease) - DO NOT post asset to balance sheet (you don't own it). Simply offset the monthly leasing costs to the profit and loss account as a regular cost.
There is no simple answer as to what is "best" from a tax point of view. You have to weigh up the "deal" you are getting from the finance company and then look at at what specific tax rules might apply to the vehicles you are looking at. As I said, these can vary due to the nature of the vehicle.
You also need to look at the taxable Benefit in Kind rules that apply to the specific vehicles you are looking at.
Company cars are not great from a taxation point of view - full stop - unless the car is a brand new low emission vehicle or classified as a commercial vehicle.
Ignoring the poor allowances and high Benefits in Kind associated specifically with "normal" motor cars, the general rules regarding assets and Capital Allowances are -
Buy outright - post asset to balance sheet in accounts as a Fixed Asset and claim Capital Allowances in tax computation
Buy on loan - post asset to balance sheet in the accounts and claim the Capital Allowances in the tax computation.
The loan is shown as a liability in the balance sheet.
The loan repayments go against the loan and the loan interest goes to the profit and loss account as an expense.
Buy on HP - post asset to balance sheet in the accounts and claim Capital Allowances in the tax computation.
The HP account is shown as a liability in the balance sheet.
The HP repayments go against the HP account and the HP charges and interest goes to the profit and loss account as an expense.
Acquire on a Lease Finance deal (Finance Lease) - post to balance sheet in accounts but DO NOT claim Capital Allowances in tax computation.
The business CANNOT claim Capital Allowances because the asset is still owned by the leasing company and THEY will be claiming the Capital Allowances on the asset.
The lease finance liability account is shown as a liability in the balance sheet. YOUR business is allowed to offset against the taxable profits of the business the depreciation charged each year on the vehicle. Normally, HMRC does not allow "depreciation" as a tax deductible cost - substituting Capital Allowances instead.
Rent Vehicle (Operational Lease) - DO NOT post asset to balance sheet (you don't own it). Simply offset the monthly leasing costs to the profit and loss account as a regular cost.
There is no simple answer as to what is "best" from a tax point of view. You have to weigh up the "deal" you are getting from the finance company and then look at at what specific tax rules might apply to the vehicles you are looking at. As I said, these can vary due to the nature of the vehicle.
You also need to look at the taxable Benefit in Kind rules that apply to the specific vehicles you are looking at.
Over and above the call of duty as ever Eric - I am looking to get my company secretary (the missus) a plug in hybrid as a company car which is tax lenient however we cant afford to buy it outright so I will get it on credit and if I can get a balance sheet asset then all the better.
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