Company car tax in business with two employees!
Discussion
So I am new to all of this. We have a meeting with the accountant next week but I want to be prepared as we are starting to look for cars.
I am joining a LTD company that has one employee, the owner,the director himself. He (soon to be we) conduct surveying and consultancy for insurance underwriters. Currently not VAT registered but be will be going that way in the new year. The company invoice for every submitted survey and 45p per mile for distance travelled from office to site. Work is international.
For the first three months I will be getting paid my current salary, phone, laptop and a lot of training on the job and courses to get me qualified. The investment the boss is putting in is huge as I wont be really earning for a good six months. I will be supplied a company car purchased through the business by finance, this will be fully maintained.
For a first car we were looking at spending circa 13k for a VW approved Passat Bluemotion. Work related fuel will be paid by the company. For personal fuel I was just hoping to chuck in what I need.
I have read about BIK but do not fully understand. I have to pay tax through PAYE as I use the vehicle outside of work?
Even though the car is second hand and 10k less than new, I still pay BIK on list? and because I don't want a 1.6 eco poop I also pay more for the 2.0?
What are the other options? A car allowance and the money gets liberated through income tax? I really didn't want to do this as during the next 18 months the girlfriend and I will be purchasing our first houses and do not want any unnecessary debt against my name, and the boss agrees with this.
I am joining a LTD company that has one employee, the owner,the director himself. He (soon to be we) conduct surveying and consultancy for insurance underwriters. Currently not VAT registered but be will be going that way in the new year. The company invoice for every submitted survey and 45p per mile for distance travelled from office to site. Work is international.
For the first three months I will be getting paid my current salary, phone, laptop and a lot of training on the job and courses to get me qualified. The investment the boss is putting in is huge as I wont be really earning for a good six months. I will be supplied a company car purchased through the business by finance, this will be fully maintained.
For a first car we were looking at spending circa 13k for a VW approved Passat Bluemotion. Work related fuel will be paid by the company. For personal fuel I was just hoping to chuck in what I need.
I have read about BIK but do not fully understand. I have to pay tax through PAYE as I use the vehicle outside of work?
Even though the car is second hand and 10k less than new, I still pay BIK on list? and because I don't want a 1.6 eco poop I also pay more for the 2.0?
What are the other options? A car allowance and the money gets liberated through income tax? I really didn't want to do this as during the next 18 months the girlfriend and I will be purchasing our first houses and do not want any unnecessary debt against my name, and the boss agrees with this.
You are correct that you pay BIK on the list price of the vehicle when new and it is banded based on CO2 emissions. You can find the details here: http://carfueldata.direct.gov.uk/
If you have private use of the vehicle and the company supplies all fuel, you will also have to pay BIK on fuel as well. The alternative is to keep records and have the company deduct the cost of your private fuel from your salary or you repay it at say 15p/mile. I don't think HMRC will be keen on you just putting fuel in to cover your private mileage.
You could take an allowance, but this would be taxed at your normal tax rate. The other alternative is to run your own car and claim 45p per mile for the first 10,000 miles and 25p per mile thereafter. These amounts would be tax free. You can also claim tax relief on these amounts if you take an allowance and run your own car. Say for example the company give you a £5k allowance this would be subject to tax and NI. If you did 10,000 business miles, you can claim tax relief on £4500 which goes some way to ofsetting the tax paid on the allowance in the first place.
If you have private use of the vehicle and the company supplies all fuel, you will also have to pay BIK on fuel as well. The alternative is to keep records and have the company deduct the cost of your private fuel from your salary or you repay it at say 15p/mile. I don't think HMRC will be keen on you just putting fuel in to cover your private mileage.
You could take an allowance, but this would be taxed at your normal tax rate. The other alternative is to run your own car and claim 45p per mile for the first 10,000 miles and 25p per mile thereafter. These amounts would be tax free. You can also claim tax relief on these amounts if you take an allowance and run your own car. Say for example the company give you a £5k allowance this would be subject to tax and NI. If you did 10,000 business miles, you can claim tax relief on £4500 which goes some way to ofsetting the tax paid on the allowance in the first place.
That isn't quite correct. If you run your own car on business you can claim UP TO the Approved Mileage Rate.
That is paid tax-free so 10,000 business miles in a year would generate £4500. Above 10,000 miles the rate drops to 25p so 20,000 miles would generate £7000.
If your employer pays LESS than the 45p/25p you can claim tax relief on the value of the shortfall.
So if you do 10,000miles and are paid 30p, you will get £3000 from the emplyer and claim tax releif on the £1500 shortfall (so £300 or £600 depending on your income tax level).
And if your employer pays more than the AMR that becomes a taxable income!
That is paid tax-free so 10,000 business miles in a year would generate £4500. Above 10,000 miles the rate drops to 25p so 20,000 miles would generate £7000.
If your employer pays LESS than the 45p/25p you can claim tax relief on the value of the shortfall.
So if you do 10,000miles and are paid 30p, you will get £3000 from the emplyer and claim tax releif on the £1500 shortfall (so £300 or £600 depending on your income tax level).
And if your employer pays more than the AMR that becomes a taxable income!
I am sure that the last option is what the boss does, offsetting against mileage.
Will see what the accountant says but looks like it's a 1.6 drivE v50 for me!
I assume if I purchase the car in my name and the allowance is paid through PAYE, I Jane to pay for all maintenance costs? We can't pay through the business?
Will see what the accountant says but looks like it's a 1.6 drivE v50 for me!
I assume if I purchase the car in my name and the allowance is paid through PAYE, I Jane to pay for all maintenance costs? We can't pay through the business?
The business could pay the maintenance but the cost will be a taxable income just like the same amount paid to you as wages would be. Question is, why would they want to take on the unquantifiable "risk" of you burning through tyres every few thousand miles, eating brakes and clutches for breakfast, or keeping your car serviced twice as often as the scheduled intervals?
The 45p/25p is intended to cover not just the fuel but all the costs of running your own car, so depreciation, insurance, tyres, maintenance, VED etc.
Remember that when you do the sums to decide whether to take a company car or cash, you need to factor in the company car tax you AREN'T having to pay out if you go cash.
The 45p/25p is intended to cover not just the fuel but all the costs of running your own car, so depreciation, insurance, tyres, maintenance, VED etc.
Remember that when you do the sums to decide whether to take a company car or cash, you need to factor in the company car tax you AREN'T having to pay out if you go cash.
Just to make the picture clearer the surveying done is for risk, so no equipment needed. The chap I am going to be working with is a friend. He has worked seven years to build the business to where it is and is wanting to expand. The outlay for training will be substantial and my wage is being paid for at least three month without earning a penny. I am very grateful for the opportunity and in the future will be part of moving the company forward, therefore I am wanting the cheapest option for the company and myself.
Pool cars are exactly the same as an allocated car. A lot of times a business often forgets to inform HMRC that someone has a pool car. One of my colleagues had a 530d for 18 months that was previously in the pool before a P11D detailing it was submitted for him, ended up with a £6k bill from the taxman!
Sy1441 said:
Pool cars are exactly the same as an allocated car. A lot of times a business often forgets to inform HMRC that someone has a pool car. One of my colleagues had a 530d for 18 months that was previously in the pool before a P11D detailing it was submitted for him, ended up with a £6k bill from the taxman!
not a pool car then was it ... pool cars return to the place of work at the end of the trip and generally don;t go home with people
some organisations are very jumpy about people taking vehicles home in case it exposes them to a feared tax or insurance issue
Eric Mc said:
And HMRC are now saying that they want anybody operating what they claim to be a pool car to keep a detailed log book of EVERY journey taken using the car showing full details of every journey such as dates, times, odometer reading at start and end of journey etc.
Like any other vehicle which is work equipment then...Eric Mc said:
Yes - but you would be surprised how lax many business owners were with monitoring the "pool use" of their so called "pool cars".
i'm guessing thatwould be among businesses that didn;t operate one or more of the following types of vehicles 'Marked' vehicles
vehicles subject to O licences
work that required a 'Managers' CPC holder
emergency uses
use of company vehicles in conection with a CQC regualted activity.
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