Car finance through company advice please

Car finance through company advice please

Author
Discussion

ju6121

Original Poster:

85 posts

204 months

Tuesday 22nd July 2014
quotequote all
Hi all

I have recently setup my own consultancy company and am looking to lease a new car through it. However I am a bit in the dark as to exactly how much I will save. Am I right in thinking that any car leased via a company can have the lease payments tax deducted ( looking at a range rover evoque so about £400 a month it seems) ? But then this saving is lost through me paying BIK? If so will there be any discernible saving?

Also how will this work for something more exotic? Say a 2 year old audi R8 spyder? Same rules but more or less saving compared to the evoque?

Any help will be much appreciated.

Ps currently drive an e92 M3 and looking to replace it with 2 cars, ideally the above

Thanks guys

TheHound

1,759 posts

121 months

Tuesday 22nd July 2014
quotequote all
ju6121 said:
Hi all

I have recently setup my own consultancy company and am looking to lease a new car through it. However I am a bit in the dark as to exactly how much I will save. Am I right in thinking that any car leased via a company can have the lease payments tax deducted ( looking at a range rover evoque so about £400 a month it seems) ? But then this saving is lost through me paying BIK? If so will there be any discernible saving?

Also how will this work for something more exotic? Say a 2 year old audi R8 spyder? Same rules but more or less saving compared to the evoque?

Any help will be much appreciated.

Ps currently drive an e92 M3 and looking to replace it with 2 cars, ideally the above

Thanks guys
As a company director it makes almost always no sense to do a company lease as you will be raped on BIK.

GreatGranny

9,097 posts

225 months

Tuesday 22nd July 2014
quotequote all
In the Lease thread it mentions needing at least 2 years of accounts when taking out a business lease.
Difficult to do in your situation being a new company.

Keep the M3 and just lease a 'practical' car on a personal scheme. Loads of good deals around.

ju6121

Original Poster:

85 posts

204 months

Tuesday 22nd July 2014
quotequote all
Thanks for the responses guys, my initial thoughts were that it wouldn't be much of a saving if any.

Eric Mc

121,779 posts

264 months

Tuesday 22nd July 2014
quotequote all
As has been mentioned above, do NOT embark on this plan UNTIL you have properly taken into account the personal Income Tax implications of a company car.

The provision of a car by an employer to a director or employee will trigger a taxable Benefit in Kind as well as a Class 1A National Insurance Charge on the company.

You need to factor in these costs before coming to any final decision.

Talk through the permutations with your accountant.

ju6121

Original Poster:

85 posts

204 months

Tuesday 22nd July 2014
quotequote all
Eric Mc said:
As has been mentioned above, do NOT embark on this plan UNTIL you have properly taken into account the personal Income Tax implications of a company car.

The provision of a car by an employer to a director or employee will trigger a taxable Benefit in Kind as well as a Class 1A National Insurance Charge on the company.

You need to factor in these costs before coming to any final decision.

Talk through the permutations with your accountant.
Will do, just wanted to get some benchmark ideas first

ju6121

Original Poster:

85 posts

204 months

Tuesday 22nd July 2014
quotequote all
Eric Mc said:
As has been mentioned above, do NOT embark on this plan UNTIL you have properly taken into account the personal Income Tax implications of a company car.

The provision of a car by an employer to a director or employee will trigger a taxable Benefit in Kind as well as a Class 1A National Insurance Charge on the company.

You need to factor in these costs before coming to any final decision.

Talk through the permutations with your accountant.
Will do, just wanted to get some benchmark ideas first

OtherBusiness

838 posts

141 months

Tuesday 22nd July 2014
quotequote all
Just for info, saw this for an Evoque on a lease deal at £279pm, but only 8000 miles pa

http://www.autocar.co.uk/car-news/deals/best-car-d...

The Range Rover Evoque is a stylish SUV which sits alongside rivals including the BMW X3 and Audi Q5. Premium offerings usually carry a premium price, but we spotted a 2.2-litre eD4 Pure model going for £279 per month on Yes Lease. That's on a two-year contract, with a deposit of £2516 and an annual mileage limit of 8000.

Eric Mc

121,779 posts

264 months

Tuesday 22nd July 2014
quotequote all
ju6121 said:
Eric Mc said:
As has been mentioned above, do NOT embark on this plan UNTIL you have properly taken into account the personal Income Tax implications of a company car.

The provision of a car by an employer to a director or employee will trigger a taxable Benefit in Kind as well as a Class 1A National Insurance Charge on the company.

You need to factor in these costs before coming to any final decision.

Talk through the permutations with your accountant.
Will do, just wanted to get some benchmark ideas first
There are far too many variations and factors to take into account for any meaningful benchmark data to be obtained.

Ignoring the economics of the finance deal and/or the vehicle itself, the factors that other factors that need to be considered are -

The personal BIK impact

The company BIK impact

The capital allowances available (if any)

The tax relief available on vehicle running costs

The VAT impact of vehicle running costs

The different accounting treatments - depending on whether bought outright/financed by bank, HP or lease

Whether the company will pay for the fuel - and the BIK effect of that

Whether the vehicle can be classed as a "Commercial Vehicle" rather than a "Car" - which affects many of the considerations listed above



ju6121

Original Poster:

85 posts

204 months

Tuesday 22nd July 2014
quotequote all
What about for electric/ hybrid cars?

I've read on hear that the BIK on the BMW i8 is 5%. What does that mean in principle?

Eric Mc

121,779 posts

264 months

Tuesday 22nd July 2014
quotequote all
ju6121 said:
What about for electric/ hybrid cars?

I've read on hear that the BIK on the BMW i8 is 5%. What does that mean in principle?
See my above post.

If you go through all the possible permutations you could end up asking 100 separate questions.

PurpleMoonlight

22,362 posts

156 months

Tuesday 22nd July 2014
quotequote all
I own a Ltd and I simply cannot see how it is ' tax efficient' to have a company car.

It is much better to purchase/lease a car personally and then claim the mileage allowance from the Ltd.

It shouldn't be hard to document 12,000 miles a year wink, giving you £5000 pa tax free.

Eric Mc

121,779 posts

264 months

Tuesday 22nd July 2014
quotequote all
As long as they are GENUINE business miles i.e. excluding home to work smile

Oakey

27,523 posts

215 months

Tuesday 22nd July 2014
quotequote all
OtherBusiness said:
Just for info, saw this for an Evoque on a lease deal at £279pm, but only 8000 miles pa

http://www.autocar.co.uk/car-news/deals/best-car-d...

The Range Rover Evoque is a stylish SUV which sits alongside rivals including the BMW X3 and Audi Q5. Premium offerings usually carry a premium price, but we spotted a 2.2-litre eD4 Pure model going for £279 per month on Yes Lease. That's on a two-year contract, with a deposit of £2516 and an annual mileage limit of 8000.
It says 5000 miles when I looked?

ETA aha, options! 5000 on business lease, 8000 on personal.

Edited by Oakey on Tuesday 22 July 15:59

sideways sid

1,371 posts

214 months

Wednesday 23rd July 2014
quotequote all
PurpleMoonlight said:
I own a Ltd and I simply cannot see how it is ' tax efficient' to have a company car.

It is much better to purchase/lease a car personally and then claim the mileage allowance from the Ltd.

It shouldn't be hard to document 12,000 miles a year wink, giving you £5000 pa tax free.
I agree.

Basically OP, using the company to fund your car only really works with something cheap, new, and fuel-efficient.
For almost anything fun (e.g. the R8) it makes much more sense to buy personally. Remember you can borrow money from your company to help pay for it / deposit if that helps.

IanHg

414 posts

236 months

Friday 25th July 2014
quotequote all
So does car related benefit in kind operate independent of how much you charge yourself as a lease/hire or can you charge yourself so much it removes the benefit in kind?

Presumably there are HMRC regs which prevent a company buying the car, reclaiming the VAT, selling it to a director and coming out ahead?

and finally, is there a minimum interest rate the company needs to charge on a director loan to prevent it being a benefit? and finally finally, does all this raise your profile with HMRC and earn you a tax audit?

Eric Mc

121,779 posts

264 months

Friday 25th July 2014
quotequote all
IanHg said:
So does car related benefit in kind operate independent of how much you charge yourself as a lease/hire or can you charge yourself so much it removes the benefit in kind?


Presumably there are HMRC regs which prevent a company buying the car, reclaiming the VAT, selling it to a director and coming out ahead?

and finally, is there a minimum interest rate the company needs to charge on a director loan to prevent it being a benefit? and finally finally, does all this raise your profile with HMRC and earn you a tax audit?
The BIK is based on percentage of the vehicle list price. The percenage used is based on the CO2 emmission rating of the car.

Yes there are HMRC regs preventing VAT frauds.

Yes, there are complex Income Tax and Corporation Tax rules regarding directors borrowing from their own company. There are also Companies Act disclosure requirements.

And finally, yes, messing around with cars in your company to try and give yourself an advantage can result in HMRC taking an interest in what you are up to.

As you can see from the questions and answers earlier in this thread, cars, companies, Corporation Tax, PAYE, VAT and general accounting regulations covering the treatment of vehicles are complex and could lead to all sorts of problems for a director and/or his company if he does not get the right advice.

Talk to your accountant.

IanHg

414 posts

236 months

Friday 25th July 2014
quotequote all
Thanks Eric

Will do but my accountant tends to be the very cautious type so thought I'd check a bit out first. I have an accounting background myself but make my living outside of tax & accounting.

Eric Mc

121,779 posts

264 months

Friday 25th July 2014
quotequote all
Most of us are cautious because we don't want to be blamed for landing our clients in trouble.

GoTea

6,039 posts

176 months

Saturday 26th July 2014
quotequote all
The cheapest "boggo spec" R8 Spyder will cost you £14k per year in company car tax (40% payer)

Lols