Own limited company - Company car - Any advantage ?

[sinizter]

If I am operating as a limited company, is there any advantage in getting a company car ?

Is there any benefit seeing as both sides of the expenses (buying/leasing and maintenance) and the taxes I would have to pay for having a company car - both sets of expenses coming from my pocket ?

I know what the BIK taxes for both the car and fuel card (if set up) entails. I think I have an idea how the company can claim the depreciation or leasing expenses (not fully clued up on this).

But I can't really work out whether there would be any advantage in having my own company give me a company car. Clearly, there is a certain price point for cars and amount of private use that this then becomes viable.

From what I have read, the company would be invariably better off leasing the car at the price range I am looking at.

Edited by sinizter on Thursday 23 December 23:01

[sinizter]

Sorry, should have mentioned in the initial post - not looking for a van or similar.

Looking at things like a 335i or M3 at the minute. I might be willing to go lower down the range if the saving stack up sufficiently. So, I am just trying to get my head round all the options available.

[CDP]

A classic car worth under 15K is taxed on it's new list price. There are other arrangements for more valuable cars.

As a result Stags, TR6s, XJ12s all work out really well and you can claim back reasonable maintenance and renovation costs. A 1300 MG Midget comes under the 1500cc barrier and might have cost as little as £1000 new.

A modern high performance car is unlikely to be a sensible move. Just run through the numbers or talk to your accountant. I'd be very surprised to see if it's worth while.

Vans are a different matter again but are rarely a perk style purchase.

[sinizter]

A friend has just acquired a 320d leased through his own limited company and used as his company car. He was advised by the accountant that he is saving a couple of hundred a month - but I am not sure if there is something there to do with student loans and income coming through company, so he makes an overall saving rather than a saving on the car per se.


What defines a classic ?

Just found it

HMRC said:

A classic car is one where:

the age of the car at the end of the year of assessment is 15 years or more and
the market value of the car for the year is £15,000 or more and
that market value exceeds the amount carried forward from step 3 of Section 121(1) ITEPA 2003.

Edited by sinizter on Thursday 23 December 23:53

Edited by sinizter on Thursday 23 December 23:57

[bunyarra]

The new sub 99g CO2 cars like the Volvo V50 and BMW 320D can prove very tax efficient as you can also offset the entire cost against your annual capital allowance plus the personal tax BIK is tasty.

[sinizter]

bunyarra said:

The new sub 99g CO2 cars like the Volvo V50 and BMW 320D can prove very tax efficient as you can also offset the entire cost against your annual capital allowance plus the personal tax BIK is tasty.

The BMW 320d is actually 109g ... So not in the efficient band. I'm really not willing to go lower down the performance ladder than a 320d. And that's already further down than I would like.

I am just trying to establish whether it is worthwhile to run a car through the company or better to run it as a personal car, when the car is a high performance model.

[Eric Mc]

For high BIK cars, it's usually more tax efficient to own the car personally and claim the maximum mileage rates for business useage.

[sinizter]

Eric Mc said:

For high BIK cars, it's usually more tax efficient to own the car personally and claim the maximum mileage rates for business useage.

Can I also keep all the expenses and claim the relevant percentage (same as business use percentage) of the total expenses ? Because my car costs me more to run than 40p once insurance is taken into account.

Currently, I am self-employed, so I keep all receipts and claim the relevant percentage off.

Looks like it will be better to just keep the car personally owned.

I read somewhere that for a rapidly depreciating car, it might be better to own it via the company for six months, then sell it to the director at a 'reasonable' price - and that it will work out better because the depreciation will outstrip the tax liability for those 6 months and as this loss will be contained within the company, work out beneficially.

[Eric Mc]

sinizter said:

Eric Mc said:

For high BIK cars, it's usually more tax efficient to own the car personally and claim the maximum mileage rates for business useage.

Can I also keep all the expenses and claim the relevant percentage (same as business use percentage) of the total expenses ? Because my car costs me more to run than 40p once insurance is taken into account.

Currently, I am self-employed, so I keep all receipts and claim the relevant percentage off.

Looks like it will be better to just keep the car personally owned.

I read somewhere that for a rapidly depreciating car, it might be better to own it via the company for six months, then sell it to the director at a 'reasonable' price - and that it will work out better because the depreciation will outstrip the tax liability for those 6 months and as this loss will be contained within the company, work out beneficially.

Your question is a bit garbled in that I don't really understand what you mean by
"Can I also keep all the expenses and claim the relevant percentage?"

When you operate a business through a limited company, the word "I" no longer comes into it regarding the business. The business is now legally separate to you and it's costs are not your expenses.

The company can only claim costs that it has incurred wholly and exclusively for the purpose of its trading activity. If YOU personally own the car, then the company has NO car expenses or Capital Allowances in relation to that vehicle, since it doesn't own it. Therefore, NONE of the bills relating to that vehicle should be processed through the comnpany's books and records - and no VAT should be claimed on such costs either.
The vehicle is YOUR'S as an individual. If you DO use it for business related journeys, YOU make the 40p/25p per mile claim from the business. This is the only element of the motoring cost that the company can offset against its business activity.

The techniques of businees percentage v' private percentage as used in sole trader types businesses does not come into the operation of cars through limited companies.

[TooLateForAName]

Eric Mc said:

and no VAT should be claimed on such costs either.

Eric,

I think that the company can reclaim VAT on the fuel element of the mileage cost. There was a chart on the HMRC web site.

OK not huge amounts but worth it if you do high miles and iirc you could go back 3 years when you make a VAT claim for this purpose.

Has this changed recently? When I ran a ltd I certainly claimed back the VAT on the mileage allowance.

[Eric Mc]

TooLateForAName said:

Eric Mc said:

and no VAT should be claimed on such costs either.

Eric,

I think that the company can reclaim VAT on the fuel element of the mileage cost. There was a chart on the HMRC web site.

OK not huge amounts but worth it if you do high miles and iirc you could go back 3 years when you make a VAT claim for this purpose.

Has this changed recently? When I ran a ltd I certainly claimed back the VAT on the mileage allowance.

Yes, the company CAN reclaim VAT based on mileage claims from directors and/or employees. The original VAT vouchers issued by the garage should be attached to the mileage claims as support for the VAT amounts being reclaimed.

This system replaced a more casual system that was in place until the early 2000s whereby no vouchers were required for reclaiming VAT on mileage claims. Instead, UK HMC&E (as it was then) decided that VAT on 50% of mileage claims was allowable (don't forget that mileage claims cover ALL the running costs of the privately owned vehicle being claimed by the employee i.e. fuel, insurance, maintenance RFL etc, some of which do not have a VAT content.

Brussels halted this practice saying that no VAT could ever be reclaimed without supporting VAT vouchers. That is why the current system is now in place whereby original fuel vouchers are attached to the mileage claims. It is still not strictly speaking legally correct in that when a company pays mileage to an employee it is paying a non-VAT registered entity and, technically therefore, has not been charged any VAT that it can recover.
It was actually the employee who was charged the VAT when the fuel was purchased at the garage. But the employee is not VAT registered and therefore the VAT reclaim sequence should really come to an end with his purchase.

VAT is messy and some rules do seem to go against normal VAT regulations.

The fact remains that the company cannot process through its books and records costs for an asset it does not own. And the general principle of not being allowed reclaim VAT for costs associated with that vehicle still stands. For example, it would be wrong for the director to have the company pay for and recover the Input VAT on a repair bill for his personally owned car.

Edited by Eric Mc on Sunday 26th December 10:24

[sinizter]

Being self-employed, I currently keep records of all expenses to do with my car. I currently have almost 80% business use. So, I claim 80% of car expenses off my taxable earnings. I am a higher rate tax payer.

There is an option to work through a limited company in my line of work (dentist). The company will not be VAT registered.


Using some figures to illustrate,
Say I have a total expense of £10,000.
£8,000 would be the cost of the business related miles (80%). So £8,000 is offset against my taxable income.

Using a limited company, if I get reimbursed, say £6,000 for the above miles, can I also offset the addition £2k against my taxable income?

[Eric Mc]

sinizter said:

Being self-employed, I currently keep records of all expenses to do with my car. I currently have almost 80% business use. So, I claim 80% of car expenses off my taxable earnings. I am a higher rate tax payer.

There is an option to work through a limited company in my line of work (dentist). The company will not be VAT registered.


Using some figures to illustrate,
Say I have a total expense of £10,000.
£8,000 would be the cost of the business related miles (80%). So £8,000 is offset against my taxable income.

Using a limited company, if I get reimbursed, say £6,000 for the above miles, can I also offset the addition £2k against my taxable income?

No.

Don't get too hung up about this aspect of tax savings through a limited company. This may be one area where a sole trader situation might score better but with a limited company there are far more options in other areas - primarilly the ability to mix and match your personal income out of the company through a mix of salaries and/or dividends.

Make sure you get good professional advice on this however before committing to the limited company route. There are lots of areas that you need to be clear about in your own head and merely asking questions on an internet forum will not provide you with sufficient information to enable you to make a decision from a position of clear understanding.

Edited by Eric Mc on Sunday 26th December 11:16

[sinizter]

Eric Mc and everyone else, thanks for taking the time to reply to my post during the holidays.

Edited by sinizter on Sunday 26th December 11:15

[Eric Mc]

sinizter said:

Eric Mc and everyone else, thanks for taking the time to reply to my post during the holidays.

Edited by sinizter on Sunday 26th December 11:15

Ha - what holidays.

It's Self Assessment time for us accountants

[TooLateForAName]

I'm interested in how you manage 80% business use as a dentist? Do you work as a locum?

[sinizter]

TooLateForAName said:

I'm interested in how you manage 80% business use as a dentist? Do you work as a locum?

I'm all over the place. I cover three prisons (upto 250 miles/week), and the days etc can vary - so it's not a regular place of work. I also work in Northampton 2 times a month - that's a 300+ mile commute each time. My only regular place of work, where I work once a week is 2.5 miles away from home. Most of our personal trips are done in my wife's car.