Our LtdCo thinking of business cars
Discussion
Advice please as I’m lost completely,
We are 18 months since startup, running lean on Salaries for the top 4-5 Directors/employees, and using our own vehicles (& homes) for business travel, which is starting to irritate us generally. Profits are there now, and large enough to now think about raising Salaries and adding Car perks.
Assuming something like a BMW X2 and or 530e hybrid, if our company leases these....how does it work for Taxes for Company and Employee (assume c£40-50k gross), and insurance ? Petrol claims at 30p ?
Politely, can someone just help with real life example, as we don’t know whether to just give Cash Car Allowance....or keep some car consistency and business hires instead. Feels like a minefield when we thought it would be a pleasure for all !
Cheers.
We are 18 months since startup, running lean on Salaries for the top 4-5 Directors/employees, and using our own vehicles (& homes) for business travel, which is starting to irritate us generally. Profits are there now, and large enough to now think about raising Salaries and adding Car perks.
Assuming something like a BMW X2 and or 530e hybrid, if our company leases these....how does it work for Taxes for Company and Employee (assume c£40-50k gross), and insurance ? Petrol claims at 30p ?
Politely, can someone just help with real life example, as we don’t know whether to just give Cash Car Allowance....or keep some car consistency and business hires instead. Feels like a minefield when we thought it would be a pleasure for all !
Cheers.
It’s a complex area but co cars only worth it if co2 emissions very low indeed. I am an accountant (tho not a tax specialist, one of my business partners does tax investigation work and assists people being prosecuted by hmrc) and have not had a company car except for a bmw i3 and shortly getting a jaguar iPace. The latter will be painful until April 2020
Pick ups / vans may cause a problem if you can not justify a genuine business need for them - is, carting lots of clobber around. My business partner said I shouldn’t get one as I have no business need for one and hmrc would not allow a deducrion for the cost in the company tax computation.
But in principle, (1) the company pays all of the costs of the vehicle and gets a deduction for the expense in the company’s corporation tax computation (2) the person who has use of the car pays tax on the taxable benefit in kind (determined by co2 emissions in bands, giving a percentage that is multiplied by the list price of the vehicle and company also pays NiC on the benefit in kind but can claim back half of the vat if on contract hire (3) approved mileage rates (published by hmrc) can be used to pay for fuel for business miles (4) v unlikely it’s worthwhile paying for full fuel cost of car including private use (tax v high)
The alternative is to pay 45p / mile for use of own car on business miles for first 10k pa and then 25p thereafter. Car allowances are just salary and taxable and NICable so nothing too exciting there
Pick ups / vans may cause a problem if you can not justify a genuine business need for them - is, carting lots of clobber around. My business partner said I shouldn’t get one as I have no business need for one and hmrc would not allow a deducrion for the cost in the company tax computation.
But in principle, (1) the company pays all of the costs of the vehicle and gets a deduction for the expense in the company’s corporation tax computation (2) the person who has use of the car pays tax on the taxable benefit in kind (determined by co2 emissions in bands, giving a percentage that is multiplied by the list price of the vehicle and company also pays NiC on the benefit in kind but can claim back half of the vat if on contract hire (3) approved mileage rates (published by hmrc) can be used to pay for fuel for business miles (4) v unlikely it’s worthwhile paying for full fuel cost of car including private use (tax v high)
The alternative is to pay 45p / mile for use of own car on business miles for first 10k pa and then 25p thereafter. Car allowances are just salary and taxable and NICable so nothing too exciting there
oop north said:
Pick ups / vans may cause a problem if you can not justify a genuine business need for them - is, carting lots of clobber around. My business partner said I shouldn’t get one as I have no business need for one and hmrc would not allow a deducrion for the cost in the company tax computation.
I heard they'd completely abandoned that on the basis as i was costing them more arguing the toss with punters than they were saving. You must make sure the payload is over a tonne, but most sold in Britain are 1050kg just to ensure they qualify for the silly low tax. Talk to your accountant. As Eric has rightly pointed out, vans can be beneficial.
My accountant also advised on an EV as the corporation tax advantages along with low bik make it worthwhile at the moment.
Your accountant should be able to review your situation and provide some advice/figures so worth an email/phone call.
My accountant also advised on an EV as the corporation tax advantages along with low bik make it worthwhile at the moment.
Your accountant should be able to review your situation and provide some advice/figures so worth an email/phone call.
TwigtheWonderkid said:
oop north said:
Pick ups / vans may cause a problem if you can not justify a genuine business need for them - is, carting lots of clobber around. My business partner said I shouldn’t get one as I have no business need for one and hmrc would not allow a deducrion for the cost in the company tax computation.
I heard they'd completely abandoned that on the basis as i was costing them more arguing the toss with punters than they were saving. You must make sure the payload is over a tonne, but most sold in Britain are 1050kg just to ensure they qualify for the silly low tax. Gassing Station | Finance | Top of Page | What's New | My Stuff