Car finance through company advice please

Car finance through company advice please

Author
Discussion

IanHg

414 posts

236 months

Saturday 26th July 2014
quotequote all
I tend to be cautious myself where there's a chance of professional indemnity.

Is there a good way of doing this via a company or is it a case of saving the effort of a pointless search and just taking the cash out?


Eric Mc

121,784 posts

264 months

Saturday 26th July 2014
quotequote all
Using the company to buy the car works best when

a) the car has very low CO2 emission rating

or

b) the car isn't a car i.e. it's defined as a "Commercial Vehicle" for Corporation Tax, VAT and Benefit in Kind purposes (the definitions are not consistent across the three tax codes).

Ultraviolet

623 posts

215 months

Saturday 26th July 2014
quotequote all
Having looked into this myself, I concluded the ONLY vehicles to consider through the company, which I would want to drive, are the Tesla model s or BMW i8 due to the capital allowance and low BIK of 0% and 5% respectively.

Uv

IanHg

414 posts

236 months

Saturday 26th July 2014
quotequote all
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?

Eric Mc

121,784 posts

264 months

Saturday 26th July 2014
quotequote all
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.

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.

IanHg

414 posts

236 months

Saturday 26th July 2014
quotequote all
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?




Eric Mc

121,784 posts

264 months

Saturday 26th July 2014
quotequote all
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".

Again, this is the type of stuff your accountant should be talking to you about.

IanHg

414 posts

236 months

Saturday 26th July 2014
quotequote all
Thanks Eric

Dr Jekyll

23,820 posts

260 months

Sunday 27th July 2014
quotequote all
What about motorbikes? I was told they are treated more leniently than cars.

DSLiverpool

14,672 posts

201 months

Sunday 27th July 2014
quotequote all
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.

Edited by DSLiverpool on Sunday 27th July 15:33

SMar

201 posts

139 months

Monday 28th July 2014
quotequote all
Dr Jekyll said:
What about motorbikes? I was told they are treated more leniently than cars.
Motorbikes are good because they are not taxed as motor vehicles.

texasjohn

3,687 posts

230 months

Tuesday 29th July 2014
quotequote all
SMar said:
Dr Jekyll said:
What about motorbikes? I was told they are treated more leniently than cars.
Motorbikes are good because they are not taxed as motor vehicles.
Benefit In Kind on motorbikes is also based on the purchase price rather than list price, I believe.