I8 ltd company purchase

[Gh76]

Reason to try convincing them its for business only is to get the VAT back aswell. Happy to keep a log if it means I get another 15k off the 100k asking price.

Don't mind paying the BIK but im assuming you cant claim VAT bck unless its 100% business use.

So my compariables are buy a brand new I8 for 105k. claim back the VAT and write it all off in first year against corporation tax.. gets the car to around 70k?

or I buy a second hand one (2015 ) for 85k which is VAT qualifying so still claim back VAT but cant write it all off in first year. (this would be a problem as next yr returns are showing big profits so wanted to offset it all first yr).

shame I cant find a decent accountant that can work this all out for me... and give me the best option.

[Eric Mc]

"What's the point in having such a car if it is 100% only for business use?

And be very aware about how restricted the meaning of "business use" is - especially in the context of the fairly recent Samadian case.

[kryten22uk]

Gh76 said:

shame I cant find a decent accountant that can work this all out for me... and give me the best option.

Why not? Any accountant should be able to do this. Perhaps not in detail for free online. The thing is, there is a hypothetical answer where you see what is best for a 100% business car, and then theres the reality of whether or not the HMRC agree with your interpretation. You'll not know the latter until they get involved. Possibly not until a few years down the line. So you'll always have that hanging over you.

[Gh76]

I guess it depends on what someone's business is.. if you plan to go to an office and park up and use it sparsly, then yes whats the point , might as well take the hit on the VAT and pay the BIK.

My working day usually consists of going to view development plots, meeting agents etc. From my experience, its a fickle business. People don't take you serious unless you look successful.

might just buy myself a yacht :-)

http://www.step.org/yacht-used-impress-customers-w...

[Eric Mc]

Gh76 said:

I guess it depends on what someone's business is.. if you plan to go to an office and park up and use it sparsly, then yes whats the point , might as well take the hit on the VAT and pay the BIK.

My working day usually consists of going to view development plots, meeting agents etc. From my experience, its a fickle business. People don't take you serious unless you look successful.

might just buy myself a yacht :-)

http://www.step.org/yacht-used-impress-customers-w...

Where does your company operate from?
What is its base?
Where will the car live when not in use?
Where will the keys be kept?

[footsoldier]

foxsasha said:

I'm looking at the exact same thing but also considering a Tesla. We haven't bothered putting cars through the business before so I'm getting my head round the details and financials. Am I correct in thinking:

1: 100% of the purchase price can be set against tax in the year of purchase?

2: realistically there's no way to claim the vat back and use the car as one would want to, i.e. for fun.

3: there's 5% BIK payable on the I8 and Tesla and this 5% is paid annually based on the retail price of the vehicle when new and then your higher tax rate percentage of the 5%.

4: 5% is only until 2016, the rate goes up to 9% from 2017 onwards?

5: does anyone know if the Tesla also goes up to 9% from 2017?

6: what's this about the company owning the car for 2 years and one day then you can purchase the car personally for a nominal fee?

Thanks

All of the above1-5 is correct, inc BIK rates. I haven't heard/ don't know about 6 - seems unlikely.

[JBM78]

Gh76 said:

I guess it depends on what someone's business is.. if you plan to go to an office and park up and use it sparsly, then yes whats the point , might as well take the hit on the VAT and pay the BIK.

My working day usually consists of going to view development plots, meeting agents etc. From my experience, its a fickle business. People don't take you serious unless you look successful.

might just buy myself a yacht :-)

http://www.step.org/yacht-used-impress-customers-w...

If you're going to have a go at claiming the VAT, the onus is on you to be able to prove that there is absolutely no private use - even e.g. stopping at the supermarket on the way home. You need mileage logs which are reconciled to the odometer, no private use shown on the insurance policy etc.... It's difficult, and requires watertight record-keeping but it's not impossible.

And if you decide to reclaim the VAT, why would you pay the BIK? Would make absolutely no sense and in fact would weaken your argument in relation to the VAT reclaim.

[foxsasha]

footsoldier said:

All of the above1-5 is correct, inc BIK rates. I haven't heard/ don't know about 6 - seems unlikely.

I only ask because of this earlier comment:

Anjum said:

If you run a company car - it's a great option........after two years and one day - sell it to yourself!

Got an accompanied test drive in an I8 booked for Sat to be followed by having it for a full day later next week and have a double slot test booked in a Tesla P85D in early November. Can't wait!

[foxsasha]

I've done some more investigating. If my understanding is correct then if a company sells a car it owns for under market value it has to pay the difference between the depreciation corrected value and the sale price at the corporation tax rate. However after 12 months I understand that the I8 and Tesla would be 100% written off for tax purposes so has no residual value on the books therefore if the car had a market value of £60,000 and was sold at £1 then there would be no corporation tax to pay?

If it was sold to an employee or director then there would be a BIK payment due on the difference between market value and sale price. Does anyone know what rate the BIK would be charged at?

So the company could buy the car, offset the full purchase price against its tax liabilities then the car could be sold after 12 months to an employee or director with a BIK penalty? Am I missing something?

Edited by foxsasha on Wednesday 14th October 21:57

[RikonLondon]

Very interested to know if this is correct as it justifies an i8 for me.

[foxsasha]

I've edited my post slightly as the original was incorrect. Tax has to be paid on the depreciation corrected value of the vehicle less the sale price, not the market value. In theory the same thing. But as the Tesla and I8 are written off completely after 12 months I assume no tax would be due no matter what price the car was sold for.

I assume that this has been taken into account and that the employee/director buying the car for £1 would get nailed through BIK charges which are payable on the difference between market value and sale price. Need to get the BIK details.

[footsoldier]

All of the benefits of buying through company have been listed.

However, as far as I can see, you can't buy the car for a £1, or be given it, without tax.
Seems clear here:

https://www.gov.uk/expenses-and-benefits-assets-bo...

Cars given or transferred as a benefit will go on p11d and therefor be taxed at market value at time of transfer. In addition, company will have to pay class 1 NI on the value of the car at point of transfer.

So, to me, it looks like tax on any undervalue transfer or sale out of the company.

[foxsasha]

So the company has to pay corp tax on the sale amount then Class 1A NIC at 13.8% of the difference between market value and the amount paid for the vehicle? And then there's BIK to pay on top? I'm struggling to wade through the HM Revenues website to find the specific details. Lots of info about calculation taxable value but I can't find the specific terms to work out the actual figure due. Does anyone know or is it one for the accountant?

[GrahamPM]

I've just bought an i8 100% paid for by my business and am running it as my DD. Not tempted to even try and start claiming the VAT back!
Having spoken (at length) with my accountant & tax advisor, this is my understanding; the car is on the company books as 'an asset' - 100% write down against Corporation Tax - saving c£20K. I'll run it for probably 2 years and when the car is sold, the funds come back into the business, which then either lets me buy another 'tax efficient' car or goes straight onto the balance sheet as profit from 'sales'.
As others have said, this only works when buying a 'new' car - all the financial incentives disappear if it's pre-owned / pre-registered etc
I did the same in our last financial year, and bought an Audi A3 Etron for one of our employees - his monthly BiK is around £40 compared to £90 for the comparable A3 TDi, and again we've saved Corporation Tax at the year end.
Graham

[schmunk]

JustinP1 said:

There was a case law with a guy with Lambo a few years back when HMRC chased them. His argument was that an estate agent (IIRC) needed to look the part. He even parked it in a rented lock up at work, not his home to demonstrate only business use.

Better than that, it was Fagomatic...

www.fagomatic.co.uk

But he didn't win...

www.hmrc.gov.uk/manuals/vitmanual/VIT64690.htm

[kryten22uk]

GrahamPM said:

As others have said, this only works when buying a 'new' car - all the financial incentives disappear if it's pre-owned / pre-registered etc

This is not true to say all incentives disappear. Whilst 100% FYA is only relevant to new cars, you still get 18%pa WDA on used. So you still benefit, just spread out over ownership period, rather than all upfront with a payback later.

[foxsasha]

If you write off 18% in year 1 and then sell the car after 12 months at a 30% loss how to you reconcile the 12% difference with regards to corp tax? Can you offset the 12% oagaimst the following years tax bill?

[kryten22uk]

foxsasha said:

If you write off 18% in year 1 and then sell the car after 12 months at a 30% loss how to you reconcile the 12% difference with regards to corp tax? Can you offset the 12% agaimst the following years tax bill?

A write-down happens at the end of a financial year to an asset that you still own at the end of the financial year, in order for the asset to have a balance sheet accounting value. If you sell an asset during the year, then there is no accounting calculation at the subsequent year end, you simply record the sale proceeds, and this will be offset against the previous year's accounting value, and you will be taxed on the resulting loss (or gain).

[JBM78]

kryten22uk said:

A write-down happens at the end of a financial year to an asset that you still own at the end of the financial year, in order for the asset to have a balance sheet accounting value. If you sell an asset during the year, then there is no accounting calculation at the subsequent year end, you simply record the sale proceeds, and this will be offset against the previous year's accounting value, and you will be taxed on the resulting loss (or gain).

Not true - you're mixing up the accounts treatment of assets with the tax treatment of assets.

[foxsasha]

GrahamPM said:

I've just bought an i8 100% paid for by my business and am running it as my DD.

How do you find it? Pleased with it?