Can a company-owned car be privately insured by an employee?
Discussion
(Not sure if this thread should be in Business or SP&L)
Simple question as per the subject line, but I should give a little background first.
I run a small single-employee limited company, with the sole employee being myself, and I'm doing a lot of business miles at the moment (500 miles a week, which I have been doing for 16 months now), and I think it would make sense for my company to buy a car for this purpose. I have sufficient funds in the company, and there would be a tax saving in spending it on a car rather than taking the money out of the company and incurring tax on it.
Purchasing the car though the company is no problem, neither is putting the company name on the V5. But I'm having a hell of a job finding car insurance where the owner of the car is stated as a company. It seems most insurers in this area are offering full-on Fleet insurance (with a minimum of 5 cars) or Commercial insurance (geared towards vans) or else are simply domestic motor insurance with Business Use included (which is different from insuring a company car).
Furthermore, there is the issue of No Claims Discount. If I add another car to my existing policy with Privilege they will mirror my NCD which is a big saving. So what would be ideal for me financially is to insure the company-owned car that way and claim the cost of the insurance from my company as an expense.
Can I do that? Or does the company-owned car *have* to be insured with a motor insurance policy in the name of the company?
Simple question as per the subject line, but I should give a little background first.
I run a small single-employee limited company, with the sole employee being myself, and I'm doing a lot of business miles at the moment (500 miles a week, which I have been doing for 16 months now), and I think it would make sense for my company to buy a car for this purpose. I have sufficient funds in the company, and there would be a tax saving in spending it on a car rather than taking the money out of the company and incurring tax on it.
Purchasing the car though the company is no problem, neither is putting the company name on the V5. But I'm having a hell of a job finding car insurance where the owner of the car is stated as a company. It seems most insurers in this area are offering full-on Fleet insurance (with a minimum of 5 cars) or Commercial insurance (geared towards vans) or else are simply domestic motor insurance with Business Use included (which is different from insuring a company car).
Furthermore, there is the issue of No Claims Discount. If I add another car to my existing policy with Privilege they will mirror my NCD which is a big saving. So what would be ideal for me financially is to insure the company-owned car that way and claim the cost of the insurance from my company as an expense.
Can I do that? Or does the company-owned car *have* to be insured with a motor insurance policy in the name of the company?
Eric Mc said:
Have you worked through fully the tax calculations?
I think so. I've been in discussion with my accountants, and for a 120 g/km car (£30 VED) on a purchase price of around £10k, doing 500 miles a week (I don't hit the 24 month rule until March next year) then it just about works out. Fuel would be paid for personally for non-business use (which of course will also include the commute once the 24-month rule applies).
Eric Mc said:
How would the car purchase be financed?
By funds held in the company bank account, accrued this year, which have not yet been subject to any form of taxation. The alternative is to take that money out as dividend and purchase the car privately, of course. There will be tax implications either way.
Zoon said:
Rather than paying cash for a depreciating asset, would it not make sense to lease the car through the company?
That's certainly an option. Although it's quite hard to find a high-mileage lease. 500 miles a week is around 23,000 miles per year (based on a 46 week year) plus most leases are 2-3 years and I don't know if this contract is going to last that long, or what my mileage will be on my next contract (a lot less I would imagine as I won't accept one that is more). A short-term high mileage lease would be ideal though, I think. But I'm not sure those even exist.
Edit: Don't read that to mean I'm rejecting your suggestion - on the contrary, it makes a lot of sense and if I am able to find a suitable package then I agree that it is the better strategy.
Edited by JonRB on Tuesday 18th August 10:31
Have a look at something electric like the BMW i3. My understanding is that if your company buys it you can offset the entire purchase against your tax. The benefit in kind tax as a company car is tiny as well. And they are bloody good to drive. I had one on a 5 day test and I have never driven anything so relaxed and tranquil in my life. Very nearly bought one but you need to do lots of miles to see a benefit in fuel savings and my commute is now only 5 miles each way.
Snowdrop_ said:
I would have thought giving yourself a car allowance, plus mileage would have been the better solution allowing you to claim the 45p per mile for the first 10,000 and then 25p thereafter.
Which is great until the 24 month rule kicks in. After that you are unable to claim. Plus the purchase of the car would have to come out of personal taxed income.
Eric Mc said:
If you go down the leasing route all the calculations you make on tax relief for the company change radically. Make sure your accountant does the sums properly for you.
Indeed. For a start, using a car purchase as a vehicle (no pun intended) for mopping up funds that would otherwise be subject to taxation if taken out as dividend no longer happens, since there is no longer a purchase being made. But on the flipside, aforementioned issues like insurance probably resolve themselves. Especially if the lease is a "fully maintained" one. Presumably there is still a BiK for the employee just like for any company car though?
Edited by JonRB on Tuesday 18th August 11:04
JonRB said:
Fuel would be paid for personally for non-business use (which of course will also include the commute once the 24-month rule applies).
Check that. It used to be that as soon as you became aware that you'd exceed 24months that was it. You write as if you already know that you'll exceed.TBH this sounds like commuting with an attempt to pretend that it isn't. This sort of thing pisses me off because it is the abuses of the system that lead to the stupid rules like ir35.
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