Car finance through company advice please
Discussion
IanHg said:
Okay so not wanting to drive around in a Navaro or a white van, if the co bought an i8 for say £100,000 I'd be looking at paying tax on £5,000 pa and the co would be able to reclaim VAT & write off against corporation tax?
Ultra, did you go ahead with yours?
If 5% is the rate applying to the list price of this car and the list price is £100,000, then the taxable BIK each year would be £5,000 as you say. If you are a 40% taxpayer, it would cost you £2,000 per annum in additional tax.Ultra, did you go ahead with yours?
The company would also have to pay an annual Class 1A National Insurance charge of £690 (£5,000 x 13.8%)
A business can claim Capital Allowances on assets it owns or is buying using borrowing or HP.
Capital Allowances are set a percentage of the COST (not list price) of the asset.
The rate of Capital Allowance claimable depends on the nature of the asset. Plant and Machinery is normally claimed at 18% per annum but an Annual Investment Allowance (AIA) of 100% can be claimed instead - effectively making a claim for the full cost of the asset against business profits in the year of purchase.
Commercial vehicles ARE eligible for the AIA. Motor cars are not UNLESS they have a CO2 rating of 110gm or lower.
This Green Car AIA was due to expire on 31 March 2013 but it is now running until 31 March 2015.
Normal Capital Allowances on cars are much, much lower.
Please note, a business CANNOT claim ANY capital allowances on ANY asset (plant, cans, cars etc) if it is LEASING the asset and not the outright owner or buying using borrowing or HP.
So, be careful of the type of finance deals you might be offered and be 100% sure that it is NOT a lease of any sort if you want to claim the Capital Allowances.
VAT is normally NOT recoverable on the purchase of a car UNLESS the car is absolutely 100% business use or is being purchased as part of normal car trading stock (i.e. you are a car dealer).
VAT CAN be recovered on Commercial Vehicles.
The BIK rules on Commercial Vehicles are less stringent than for cars and they are usually far less costly.
Thanks Eric, appreciate the information.
Most likely it would be a cash purchase & the i8 has a combined CO₂ emissions of 49.0 g/km so if I've understood correctly the whole cost could be written off in the year of purchase.
Shame about the VAT.
Presumable if you lease then you just treat the lease costs as an expense so you're not really losing out tax wise and if there's VAT on lease costs then guess they'd be reclaimable?
Most likely it would be a cash purchase & the i8 has a combined CO₂ emissions of 49.0 g/km so if I've understood correctly the whole cost could be written off in the year of purchase.
Shame about the VAT.
Presumable if you lease then you just treat the lease costs as an expense so you're not really losing out tax wise and if there's VAT on lease costs then guess they'd be reclaimable?
IanHg said:
Thanks Eric, appreciate the information.
Most likely it would be a cash purchase & the i8 has a combined CO2 emissions of 49.0 g/km so if I've understood correctly the whole cost could be written off in the year of purchase.
Shame about the VAT.
Presumable if you lease then you just treat the lease costs as an expense so you're not really losing out tax wise and if there's VAT on lease costs then guess they'd be reclaimable?
The way leased assets are accounted for is complex - and it depends on whether the lease is a "Finance Lease" or an "Operational Lease".Most likely it would be a cash purchase & the i8 has a combined CO2 emissions of 49.0 g/km so if I've understood correctly the whole cost could be written off in the year of purchase.
Shame about the VAT.
Presumable if you lease then you just treat the lease costs as an expense so you're not really losing out tax wise and if there's VAT on lease costs then guess they'd be reclaimable?
Again, this is the type of stuff your accountant should be talking to you about.
Back to the OP I will be doing this, we run 2 privately funded cars in our family , both will go to be replaced with a Mitsubishi outlander electric as a company car but used by the mrs mainly and as this is "free" to our family finances as well as very affordable to the company it means "my" car can be the equivalent of both cars cost now, in other words I can treat myself.
This works because I do low miles and commute 5.5 miles a day, if I had heavy miles one week it would swap cars with the mrs.
This works because I do low miles and commute 5.5 miles a day, if I had heavy miles one week it would swap cars with the mrs.
Edited by DSLiverpool on Sunday 27th July 15:33
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