BMW i8......order is in.

[slippery]

CRA1G said:

I'm going to be biting my finger nails now... Worrying about deprecation...






On the other hand may be not... ...

+1

[spunko2010]

slippery said:

You're better off to buy one than lease one, because unlike most cars, you can get 100 percent write off against your corporation tax. It only appears back on your books as profit again once you eventually sell it.

I'm sure you're right, but I don't understand this. If the company were to outright buy an i8 (£100k) then that would be £100k lowered from your CT bill , but wouldn't the company then need to pay CGT and when the i8 is sold in 2 years time for £50k, you'd still need to pay CT on the £50k profit.

Is any of that accurate? I want to reduce my CT bill before December.

[Rocksteadyeddie]

spunko2010 said:

slippery said:

You're better off to buy one than lease one, because unlike most cars, you can get 100 percent write off against your corporation tax. It only appears back on your books as profit again once you eventually sell it.

I'm sure you're right, but I don't understand this. If the company were to outright buy an i8 (£100k) then that would be £100k lowered from your CT bill , but wouldn't the company then need to pay CGT and when the i8 is sold in 2 years time for £50k, you'd still need to pay CT on the £50k profit.

Is any of that accurate? I want to reduce my CT bill before December.

that's correct. In short you are deferring your CT and ultimately paying it on a smaller amount. And get to tool around in an I8 in the meantime.

[5to1]

spunko2010 said:

I'm sure you're right, but I don't understand this. If the company were to outright buy an i8 (£100k) then that would be £100k lowered from your CT bill , but wouldn't the company then need to pay CGT and when the i8 is sold in 2 years time for £50k, you'd still need to pay CT on the £50k profit.

Is any of that accurate? I want to reduce my CT bill before December.

Yes its mostly accurate although not sure why you mentioned CGT?

This only makes sense if you'd consider cars in the £50k+ price bracket in the first place. Its not going to put more money in your pocket (the cars obviously not going to appreciate). Its just using that money in a way thats more beneficial to you.

In the case of the i8 we're talking about an expensive sports car. Say you bought/leased a 911 instead, consider how much of that £100k you'd be left with at the end of the 3 years.

Obviously if you wouldn't ever buy an expensive sports car this probably isn't for you. But you can then look at other cars which currently offer 100% FYA and very low BIK, say the i3/etc. Then compare the ultimate cost/benefit to you against say the 1 series you'd otherwise buy.

[slippery]

5to1 said:

spunko2010 said:

I'm sure you're right, but I don't understand this. If the company were to outright buy an i8 (£100k) then that would be £100k lowered from your CT bill , but wouldn't the company then need to pay CGT and when the i8 is sold in 2 years time for £50k, you'd still need to pay CT on the £50k profit.

Is any of that accurate? I want to reduce my CT bill before December.

Yes its mostly accurate although not sure why you mentioned CGT?

This only makes sense if you'd consider cars in the £50k+ price bracket in the first place. Its not going to put more money in your pocket (the cars obviously not going to appreciate). Its just using that money in a way thats more beneficial to you.

In the case of the i8 we're talking about an expensive sports car. Say you bought/leased a 911 instead, consider how much of that £100k you'd be left with at the end of the 3 years.

Obviously if you wouldn't ever buy an expensive sports car this probably isn't for you. But you can then look at other cars which currently offer 100% FYA and very low BIK, say the i3/etc. Then compare the ultimate cost/benefit to you against say the 1 series you'd otherwise buy.

Spot on. In my case, I was comparing a used McLaren 12C with the i8 and although the purchase prices weren't that different, the tax differences were enormous. I know the McLaren is in a different league, but I'm sure the i8 will be interesting enough to hold my attention for a while.

[Jon1967x]

5to1 said:

spunko2010 said:

I'm sure you're right, but I don't understand this. If the company were to outright buy an i8 (£100k) then that would be £100k lowered from your CT bill , but wouldn't the company then need to pay CGT and when the i8 is sold in 2 years time for £50k, you'd still need to pay CT on the £50k profit.

Is any of that accurate? I want to reduce my CT bill before December.

Yes its mostly accurate although not sure why you mentioned CGT?

This only makes sense if you'd consider cars in the £50k+ price bracket in the first place. Its not going to put more money in your pocket (the cars obviously not going to appreciate). Its just using that money in a way thats more beneficial to you.

In the case of the i8 we're talking about an expensive sports car. Say you bought/leased a 911 instead, consider how much of that £100k you'd be left with at the end of the 3 years.

Obviously if you wouldn't ever buy an expensive sports car this probably isn't for you. But you can then look at other cars which currently offer 100% FYA and very low BIK, say the i3/etc. Then compare the ultimate cost/benefit to you against say the 1 series you'd otherwise buy.

If you offset the 100k when you bought it you are effectively depreciating its worth to zero and you save the CT. Whether the car is really worth 1p or 100k is irrelevant if the tax man allows you to value it as zero on your books - its still an asset of the company. When you come to sell it, if you do so at 50k the asset you've previously told the tax man is worthless has realized 50k hence the appreciation. It does give you flexibility but in effect, in the end, you will only offset the depreciation of the asset against tax over the life of the car. If this is not true, buy 10 of them, sell 9 straight away - you've just knocked £1m off your CT and pocketed £500k tax free.

On this basis, the only real benefit you get as far as I can see is the low BiK while using it.

[5to1]

Jon1967x said:

If you offset the 100k when you bought it you are effectively depreciating its worth to zero and you save the CT. Whether the car is really worth 1p or 100k is irrelevant if the tax man allows you to value it as zero on your books - its still an asset of the company. When you come to sell it, if you do so at 50k the asset you've previously told the tax man is worthless has realized 50k hence the appreciation. It does give you flexibility but in effect, in the end, you will only offset the depreciation of the asset against tax over the life of the car. If this is not true, buy 10 of them, sell 9 straight away - you've just knocked £1m off your CT and pocketed £500k tax free.

On this basis, the only real benefit you get as far as I can see is the low BiK while using it.

I don't think anyones suggesting its a means to make money, I think I said that in my original post (I was just questioning why CGT, not that you'd pay CT on the £50K you sold the car for). But the benefit is more then then BIK. The 100% FYA essentially means the tax man is funding 20% of the purchase and taking his share of depreciation come resale. It doesn't of course mean you aren't funding the other 80% and taking the depreciation on that (i think we all agree its not going to appreciate).

I think the best way to illustrate this is to consider that the cars worth nothing when you come to sell. In this case if you'd bought it with your own money, you'd have lost £100k. But if you buy it with your company's profits with a 100% write down, you've effectively lost £80k, £20k of that £100k wouldn't have gone to you anyway. Obviously theres BIK, income tax, etc to consider aswell, but thats just a simple example to illustrate the point. Of course there's a third option, which is the best financial decision. Don't buy a new, expensive car

[tjlazer]

Drove past one in the traffic last night. All in black with the lights on it really did look like the future. Sadly it was stuck on the M25 like the rest of us ;p

[5to1]

tjlazer said:

Drove past one in the traffic last night. All in black with the lights on it really did look like the future. Sadly it was stuck on the M25 like the rest of us ;p

Unfortunately, sitting in traffic that isn't moving, probably does look like the future aswell :/ It will just be the roles that will be reversed, everyone will be in some "i" car staring at the guy in the fossil fuel burner "classic" thinking lucky git how can he afford that

[Jon1967x]

5to1 said:

Jon1967x said:

If you offset the 100k when you bought it you are effectively depreciating its worth to zero and you save the CT. Whether the car is really worth 1p or 100k is irrelevant if the tax man allows you to value it as zero on your books - its still an asset of the company. When you come to sell it, if you do so at 50k the asset you've previously told the tax man is worthless has realized 50k hence the appreciation. It does give you flexibility but in effect, in the end, you will only offset the depreciation of the asset against tax over the life of the car. If this is not true, buy 10 of them, sell 9 straight away - you've just knocked £1m off your CT and pocketed £500k tax free.

On this basis, the only real benefit you get as far as I can see is the low BiK while using it.

I don't think anyones suggesting its a means to make money, I think I said that in my original post (I was just questioning why CGT, not that you'd pay CT on the £50K you sold the car for). But the benefit is more then then BIK. The 100% FYA essentially means the tax man is funding 20% of the purchase and taking his share of depreciation come resale. It doesn't of course mean you aren't funding the other 80% and taking the depreciation on that (i think we all agree its not going to appreciate).

I think the best way to illustrate this is to consider that the cars worth nothing when you come to sell. In this case if you'd bought it with your own money, you'd have lost £100k. But if you buy it with your company's profits with a 100% write down, you've effectively lost £80k, £20k of that £100k wouldn't have gone to you anyway. Obviously theres BIK, income tax, etc to consider aswell, but thats just a simple example to illustrate the point. Of course there's a third option, which is the best financial decision. Don't buy a new, expensive car

I think we're saying the same thing. It sounded like (and maybe not by yourself) that the ability to write off the 100k in year 1 was magical, whereas you'd almost certainly be able to write off more than the depreciation each year.

100k write off year 1 saving 20k CT,
no write off in subsequent years you own it,
sell for 50k in year 4 and pay CT of 20% on the 50k as it was worth zero on your books and so selling is all profit... you therefore pay 10k CT,
Overall you've only saved 10k

The alternate is

100k, but only depreciate 20% a year, after Y1 its worth 80k, you've written off 20k, you've saved CT of 4k
Year 2, its down to 60k (assumes you use straight line depreciation), another 4k CT saved
Year 3 its down to 40k.. save 4k
Year 4 you sell for 50k, you pay CT on the 10k you make above your book valuation, so you pay CT of 2k.
Overall you've only saved 12k and paid 2k so overall a saving of 10k.

So the benefit of buying an i8 compared to any other 100k company car doesn't make a lot of difference over the life of the asset. That only leaves the BiK of an i8 v a gas guzzler.

Edited by Jon1967x on Saturday 4th October 11:19

[spunko2010]

Alright, thanks. I understand that the i8 is suitable to lease through the company given the small BIK. However I didn't think it was possible to claim BIK if you purchased outright?


Using a worked example, let's say there is a £500k CT bill due. You buy an i8 for £100k using company funds, this means the CT bill is now £400k. When you sell the i8 in 3 years time for £50k, you would need to pay the £50k to the company and this would attract CT. So essentially you are making a £50k saving on your CT bill over 3 years. Is there anything else to be aware of, such as any hidden tax obligations? Obviously I should speak to my accountant but I can't be bothered at this stage.

[slippery]

You don't claim BIK, you pay personal tax on it. In the case of this car with 5 percent BIK, a 40 percent tax payer will pay £2k a year company car tax, where as a traditional £100k sports car would see them paying £14k a year, company car tax.

[margerison]

Saw one today, looks very imposing in the flesh. Back end needs to grow on me:

[sneijder]

tjlazer said:

Drove past one in the traffic last night. All in black with the lights on it really did look like the future. Sadly it was stuck on the M25 like the rest of us ;p

There are interior lighting strips (think you can adjust the colour) that make it even more 'Tron'

It was only just getting dark when we were done, ours had the Laser Lights. The car wasn't the final spec, but there was a real visible blue tint to the beam.

[Migx]

seem one yesterday in banbury. looks amazing. wanted to stop and have a look but was running late.

[kryten22uk]

spunko2010 said:

Using a worked example, let's say there is a £500k CT bill due. You buy an i8 for £100k using company funds, this means the CT bill is now £400k. When you sell the i8 in 3 years time for £50k, you would need to pay the £50k to the company and this would attract CT. So essentially you are making a £50k saving on your CT bill over 3 years. Is there anything else to be aware of, such as any hidden tax obligations? Obviously I should speak to my accountant but I can't be bothered at this stage.

This is wrong. See earlier posts as they summarise it well. An expense such as the 100k FYA clearly doesnt directly reduce your CT bill. Instead it reduces your profit on which CT is paid. So if you made 500k profit, then your CT would be 100k, but if you bought the i8 it would reduce your profit to 400k and hence your CT bill reduces to 80k. So 20k CT saving in year of purchase. But as mentioned previously, when you come to sell the car the proceeds are treated as profit. So say you get 50k selling it, then its an extra 50k profit in year 3 resulting in extra CT in year 3 of 10k.

In short, CT saving is 20% x Depreciation.

[farbbm]

Managed to get a drive in one of these on Sunday at the local dealer's I event. I was intially apprehensive as to what to expect from it, but what an utterly astounding car. If this is the future then I like it.

I salute anyone purchasing one of these mightly impressive machines.