buying advice - M4 Convertible & X5

[jimbooo]

Hi There, ive got an M135 currently but after a year of ownership im kind of bored with it and looking to change. also my wifes child wagon is a little tired and i am thinking of replacing that at the same time.
the plan is to purchase a new M4 convertible plus an X5 together on a company lease. i havent called for quotes yet, obviously it wont be cheap but i thought there might be some advise on here as to the best way to approach it.
coupled into the deal is the requirement to pay a settlement figure on my M135 that is 1 year into a 4 year agreement.

my assumption is the lease cost will be cheaper if i go non main dealer but with not much assistance with the settlement figure on the m135. then again if i am buying main dealer they might be able to reduce the overall package to make it advantageous to go with them.

obviously i need to make some calls but thought id start here..any advice would be welcomed.

thanks all

[jrinns]

Have you spoken to an accountant about Company lease? sounds like a crazy move to me fella.

You can get your settlement figure by calling the number on your finance agreement. Would work out better to sell / car pay it off in any order rather than Part exchange.

[NORTS]

As above, speak to your accountant. BIK screws this concept up to make it worth while in most cases now.

[jimbooo]

hi there,

yes spoken to accountant, lease is the cheapest route. my M135 is on a hire purchase paying £545 a month, equivalent on lease would be around £285 per month. even with BIK tax its a cheaper option in general. bearing in mind any expenditure on car reduces my corporation tax as i would have paid 20% tax on that profit.

[TheHound]

jimbooo said:

hi there,

yes spoken to accountant, lease is the cheapest route. my M135 is on a hire purchase paying £545 a month, equivalent on lease would be around £285 per month. even with BIK tax its a cheaper option in general. bearing in mind any expenditure on car reduces my corporation tax as i would have paid 20% tax on that profit.

However, you are comparing apples (hire purchase) with oranges (company lease) here. If you based this on company lease (£285pm) vs personal lease (£342pm to include the VAT) on the M135i. As a 40% tax payer you would be paying c££2,300 more a year in tax overall (even taking into account the small savings on corporation tax).

Factor in your are looking at two new cars on a company lease, both of which are going to be considerably more in BIK than the m135i, it would be silly to go down this route.

In tax terms, it doesn't make any sense as Director to have a company car unless your looking at something like an i3.

Edited by TheHound on Wednesday 14th May 16:08

[jimbooo]

Hi and thanks for the input. i will speak to my accountant again
surely doing it on a personal lease will pay the tax twice (the VAT not reclaimable on the personal lease plus the corporation tax on the additional earnings i would draw down in order to pay the personal lease.)

if the company pays the lease costs we get half the vat back plus i wont draw that money as earnings but instead is would come down to a company "expense" and reduce the profit hence not paying corp tax on it.

i am the sole director and share holder (with a handful of shares to the Mrs as you do..) of the business so dont draw a large wage just minimum directors wage and dividends as and when needed. my issue is a large corp tax bill doe to the retained profits in the company.

as i said ill talk to the accountant again and run it by him.

the method of finance aside for now are there any tips on how to get the best price on the two cars? is there a good time of year to approach the deal for example or anything like that. im in no massive rush as i can continue with current cars for a while, 6 months or so. plus id imagine there is a hefty waiting list on the M4 convertible at present as well

thanks for the input guys, got me thinking..

[TheHound]

Not sure the best place or time to lease, as have never done this with a BMW before.

To clarify the personal vs Company lease debate, the "savings" per year going down the company route are;

1/2 the VAT = £342
and 20% CT on the cost = £752

Total: £1094

However, this would incur you a BIK bill of c£3,800 (as a 40% tax payer), therefore actually costing you c£2,700 (3,800 less the £1094 "savings") to do it this way.

[jimbooo]

Sorry should have said I'm not a 40% tax payer I take minimum paye wage and the rest dividends my tax is 20% not 40%. I'm unsure how much difference this makes.

[TheHound]

Noted about being a 20% tax payer but will the 9k a year p11d value take you over the threshold?

I assume you are taking around 8-9k in salary and the rest in dividend. Remember this will allow you only around £30500 on top of this salary as div/P11D value before your at 40%.

[x5x3]

TheHound said:

In tax terms, it doesn't make any sense as Director to have a company car unless your looking at something like an i3.

could you expand on that please?

[jimbooo]

TheHound said:

Noted about being a 20% tax payer but will the 9k a year p11d value take you over the threshold?

I assume you are taking around 8-9k in salary and the rest in dividend. Remember this will allow you only around £30500 on top of this salary as div/P11D value before your at 40%.

just spoken to accountant again and it seems im being dumb. you are absolutley right both cars on company would bugger me on tax. far cheaper to take personal lease and just pay myself more to cover the costs. thanks for the advise

[jimbooo]

x5x3 said:

could you expand on that please?

the advise i have just had from my accountant is that the P11d value counts against your earnings. so M4 and x5 purchased through company is around 100K worth of cars and the P11D will use up all my tax free allowance on dividends and PAYE.

get it on personal lease and tax free earnings are untouched apart from the actual cost of the lease payments, far less than 100K !

could have been an expensive faux par!

[x5x3]

I meant the i3 bit - i.e. an electric/hybrid car

[TheHound]

x5x3 said:

I meant the i3 bit - i.e. an electric/hybrid car

40% tax payer- BIK tax is only £613 pa on an i3. So with the VAT saving and CT saving, it should be more tax efficient to do a company lease than a personal lease as a director.

[x5x3]

TheHound said:

40% tax payer- BIK tax is only £613 pa on an i3. So with the VAT saving and CT saving, it should be more tax efficient to do a company lease than a personal lease as a director.

cheers, so still not an efficient way of getting money out of the company (can i say efficient - is that tax avoidance or tax evasion?), best to leave cash there and dissolve the company at some point in the future?

sorry of going a bit off topic!

[jimbooo]

after getting a few quotes im back to the drawing board. best quote on PCP for M4 Convertible is £966, x5 is £614 total per month combined cost for both £1580 (worked out on base spec for both and x5 model 2.5 sdrive msport). 5K deposit on each car and pcp over 4 years.

however through company lease over 3 years £715 ish on M4 convertible and £400 on x5 (M4 deposit £4290, x5 £2400)

so comparing the personal vs company for both cars...

personal pcp
deposit £10,000
4 years of £1580 per month

company contract hire
deposit £6690
3 years of £1115

so in the first year company route is £8890 cheaper, for the subsequent years £5580 cheaper.

the question is then am i going to be penalised in tax terms to a greater extent than the saving if i put it through the company.

I shall speak to the accountant again

(incase you are wondering personal lease works out more expensive than personal PCP so not an option)

[zedstar]

Lease it through the company and have payments against your DL account.

Or better still apply for the company lease and have the direct debit coming out your own account, both these ways give you the lower rate without any BIK problems...

[Redarress]

OP. Does your wife work within your company ? Are you using her tax allowance

[forest172]

Nobody's mentioned private lease them and then charge your company .45p per mile up to 10k on each car. In total 9000 in you pockets tax free