Self-employed - company car or not?
Discussion
OK so the situation is I'm an IT contractor and recently changed jobs and my commute is 100 per day which is racking up the miles on the Cayman. I've asked my accountant several times about cars through the business but he's always steered me away from them and advised to buy my own and claim the mileage. I've toyed with hybrids, vans (commercial) but my circumstances are changing also....
My parents are at the point where they need some help, my dad is in hospital 70 miles away so the round trips are circa 170+ miles a day currently, so I need to have something which I can get them in... rules out a van.
So I've toyed with leasing something small (and cheap) like a Yaris hybrid over a couple of years through the business and taking the tax hit, or am I better buying a bit of a sleeper myself, something like a 80,000 mile plus MK5 Golf GT TDI for say 5K, obviously I'll take a hit on corporation tax as I'll buy with a divi, but at least I can continue to claim the full mileage allowance.
Any simple answers?
My parents are at the point where they need some help, my dad is in hospital 70 miles away so the round trips are circa 170+ miles a day currently, so I need to have something which I can get them in... rules out a van.
So I've toyed with leasing something small (and cheap) like a Yaris hybrid over a couple of years through the business and taking the tax hit, or am I better buying a bit of a sleeper myself, something like a 80,000 mile plus MK5 Golf GT TDI for say 5K, obviously I'll take a hit on corporation tax as I'll buy with a divi, but at least I can continue to claim the full mileage allowance.
Any simple answers?
tter IMO.Eric Mc said:
Are you really self employed or the director of your own limited company?
If the former, the notion of "company car" is meaningless.
If the latter, it is vital that you know what you are talking about.
To clarify, I'm the director of my own ltd company..If the former, the notion of "company car" is meaningless.
If the latter, it is vital that you know what you are talking about.
So, what's the best solution to my problem i.e. which is going to hit my pocket the least and pro's and con's
Freakuk said:
OK so the situation is I'm an IT contractor and recently changed jobs and my commute is 100 per day which is racking up the miles on the Cayman. I've asked my accountant several times about cars through the business but he's always steered me away from them and advised to buy my own and claim the mileage. I've toyed with hybrids, vans (commercial) but my circumstances are changing also....
I'm interested in hearing the answer to this. My accountant has also always steered me away from company car purchase or lease, to the point at which it sometimes feels like a stock answer. But I'm doing 500 miles a week and have been for 16 months, and assuming the contract gets renewed then I'll hit the 24 Month rule which is going to really increase my costs, to the point where I will need to look at buying a diesel motorway barge with exceptional MPG. If I could purchase that through the company then, even with Benefit in Kind, it could work out cheaper than running a personal car and being unable to claim the mileage due to the 24 Month rule.
Well, how can you answer a person's question properly if you don't know their exact status? In regards to "company cars" then there is world of difference in the tax treatment.
If a new client phoned me up out of the blue and said "I'm self employed and am thinking of buying a company car", I would ask the exact same question - otherwise I' would not be able to advise them properly.
If a new client phoned me up out of the blue and said "I'm self employed and am thinking of buying a company car", I would ask the exact same question - otherwise I' would not be able to advise them properly.
Freakuk said:
To clarify, I'm the director of my own ltd company..
So, what's the best solution to my problem i.e. which is going to hit my pocket the least and pro's and con's
It's a question that has been asked zillions of times on PH. In fact, there has been a thread on this topic only in the last few days.So, what's the best solution to my problem i.e. which is going to hit my pocket the least and pro's and con's
The question is now not an easy one to answer.The general advice up to now has been that for "normal" cars, the best solution was to acquire the car privately and charge mileage to your own company at 45p per mile for the first 10,000 miles and 25p on miles over 10,000.
However, there are some (usually eco-friendly) cars where having it in the company can work out well. Having said that, some of these favourable tax treatments are already being diminished.
An alternative is to chose a vehicle which HMRC lasses as a "commercial vehicle" rather than a "motor car" and buy that through the company. These often work out very well.
Simple suggestion is - talk to your accountant.
Eric Mc said:
Well, how can you answer a person's question properly if you don't know their exact status? In regards to "company cars" then there is world of difference in the tax treatment.
If a new client phoned me up out of the blue and said "I'm self employed and am thinking of buying a company car", I would ask the exact same question - otherwise I' would not be able to advise them properly.
Fair enough, Eric. It was just gentle ribbing on my part anyway. If a new client phoned me up out of the blue and said "I'm self employed and am thinking of buying a company car", I would ask the exact same question - otherwise I' would not be able to advise them properly.
Eric Mc said:
The general advice up to now has been that for "normal" cars, the best solution was to acquire the car privately and charge mileage to your own company at 45p per mile for the first 10,000 miles and 25p on miles over 10,000.
... for the first 24 months of the contract. Or, worse, as soon as the contract is for 24 months - so if they take you* on for an initial 3 months and then like you so much that they offer you a 2 year extension, then you're unable to claim thereafter. So once you are talking about an expensive long distance commute with no ability to claim the mileage, suddenly the waters become far muddier.
Anyway, if there is already a thread running I will go look for it rather than pollute this one with my (admittedly similar) question.
(* - when I say 'you', I of course mean the legal entity that is the PSC)
Still no closer on this, basically do I take a dividend and buy at max a £6k turbo diesel golf with a million miles on the clock, and pay corporation tax or do a company car lease over 24 months at around £200 per month?
If I had a company motor what does the mileage rate work out at also? Surely not the same as a personal vehicle?
Help
If I had a company motor what does the mileage rate work out at also? Surely not the same as a personal vehicle?
Help
Freakuk said:
Still no closer on this, basically do I take a dividend and buy at max a £6k turbo diesel golf with a million miles on the clock, and pay corporation tax or do a company car lease over 24 months at around £200 per month?
I'd say that's a question for your accountant, because only he knows your affairs. When you say Freakuk said:
I've asked my accountant several times about cars through the business but he's always steered me away from them and advised to buy my own and claim the mileage.
- being a cynic I wonder if he actually knows about company cars/ramifications thereof/options. The logical thing would be to ask him to run the numbers on each option and then you can see the most favourable.And yes, you should know you're not self-employed :slap:
I've been looking into this also, and it is really complicated!
You can buy a car outright through the company but you can't claim the VAT back and capital write-down rules are really complicated. Although it *is* a way of spending company money without having to take it out of the company as a dividend and hence pay Corporation Tax on it.
If you Contract Hire or Lease a car through the company, then you can offset the cost as a trading expense and claim back half the VAT too.
Either way, though, the employee benefiting from the car has to pay a Benefit in Kind taxation that is based, not on the miles they do, but on the amount of CO2 the car produces and a percentage of how much the car was when it was new (not how much it actually cost to buy, if buying second hand). This can add up to a lot of money - my accountant was talking about an additional personal tax burden of around a grand a year.
You can buy a car outright through the company but you can't claim the VAT back and capital write-down rules are really complicated. Although it *is* a way of spending company money without having to take it out of the company as a dividend and hence pay Corporation Tax on it.
If you Contract Hire or Lease a car through the company, then you can offset the cost as a trading expense and claim back half the VAT too.
Either way, though, the employee benefiting from the car has to pay a Benefit in Kind taxation that is based, not on the miles they do, but on the amount of CO2 the car produces and a percentage of how much the car was when it was new (not how much it actually cost to buy, if buying second hand). This can add up to a lot of money - my accountant was talking about an additional personal tax burden of around a grand a year.
Freakuk said:
OK so the situation is I'm an IT contractor and recently changed jobs and my commute is 100 per day which is racking up the miles on the Cayman. I've asked my accountant several times about cars through the business but he's always steered me away from them and advised to buy my own and claim the mileage. I've toyed with hybrids, vans (commercial) but my circumstances are changing also....
My parents are at the point where they need some help, my dad is in hospital 70 miles away so the round trips are circa 170+ miles a day currently, so I need to have something which I can get them in... rules out a van.
So I've toyed with leasing something small (and cheap) like a Yaris hybrid over a couple of years through the business and taking the tax hit, or am I better buying a bit of a sleeper myself, something like a 80,000 mile plus MK5 Golf GT TDI for say 5K, obviously I'll take a hit on corporation tax as I'll buy with a divi, but at least I can continue to claim the full mileage allowance.
Any simple answers?
Your accountant has given you his professional, paid for advice and he knows your circumstances and he is a tax expert.My parents are at the point where they need some help, my dad is in hospital 70 miles away so the round trips are circa 170+ miles a day currently, so I need to have something which I can get them in... rules out a van.
So I've toyed with leasing something small (and cheap) like a Yaris hybrid over a couple of years through the business and taking the tax hit, or am I better buying a bit of a sleeper myself, something like a 80,000 mile plus MK5 Golf GT TDI for say 5K, obviously I'll take a hit on corporation tax as I'll buy with a divi, but at least I can continue to claim the full mileage allowance.
Any simple answers?
If you do not take his advice or do not trust or believe him then maybe get another accountant rather than ask unqualified people on here who do not know your circumstances or financial situation so how can they answer you properly?
jonah35 said:
Your accountant has given you his professional, paid for advice and he knows your circumstances and he is a tax expert.
If you do not take his advice or do not trust or believe him then maybe get another accountant rather than ask unqualified people on here who do not know your circumstances or financial situation so how can they answer you properly?
The problem is that every accountant seems to give the same answer of "don't bother with company cars". I've asked two separate accountants and had the same response and so have friends of mine so that is a widespread of different accountants. Now perhaps this is the right answer for 80% of company directors but it isn't as clear cut as they'd have you believe. If you do not take his advice or do not trust or believe him then maybe get another accountant rather than ask unqualified people on here who do not know your circumstances or financial situation so how can they answer you properly?
Even with my limited business mileage, there are certain low emission cars available now where even from my limited understand, it certainly looks like it be would be more tax efficient to run it through the company. Sometimes it feels like you get the standard answer because the accountants can't be bothered to run the numbers or do all the paperwork.
Guvernator said:
The problem is that every accountant seems to give the same answer of "don't bother with company cars". I've asked two separate accountants and had the same response and so have friends of mine so that is a widespread of different accountants. Now perhaps this is the right answer for 80% of company directors but it isn't as clear cut as they'd have you believe.
Even with my limited business mileage, there are certain low emission cars available now where even from my limited understand, it certainly looks like it be would be more tax efficient to run it through the company. Sometimes it feels like you get the standard answer because the accountants can't be bothered to run the numbers or do all the paperwork.
I agree. This is exactly the conclusion that I'm also coming to. You get the feeling that it is very much a stock "one size fits all" standard answer. Even with my limited business mileage, there are certain low emission cars available now where even from my limited understand, it certainly looks like it be would be more tax efficient to run it through the company. Sometimes it feels like you get the standard answer because the accountants can't be bothered to run the numbers or do all the paperwork.
Having said that, I'm starting to come to the point where I'm feeling like it really is more trouble than it's worth and might just buy a cheap snotter privately from taxed personal income and be done with it.
It's not the acccountants job to scour the market and identify the car that best fits your social needs and which has a near unique engine/tax combination. How can an accountant advise on best when the one biggest variable is unknown?
If you chose the cars and said here is the car what is the best method to run it then that's different.
If you chose the cars and said here is the car what is the best method to run it then that's different.
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