Company Car through the business or not.

[Exigeowner]

My accountant always dismisses any possibility of buying a company car through the business, I just wanted to check with the masses here if thats always the case.

Im looking to get a Range Rover Sport, was looking at second hand for about 30 K but could consider new if there are tax / vat advantages.

my details are that im a higher rate tax payer, and my business pays 30% corp tax.

I would do about 10,000 miles per year.

I do some business miles each year but not a massive amount, maybe 3000 miles.

thanks

[Graham]

The tax is a straight percentage of the original LIST price of the vehicle off your tax code based on the co band of the car.. so your going to get gang banged by the revenue for an RR..( 30+%)

the number of business miles doesnt matter these days, and you'll also pay a chunk of wedge for fuel allowance.

you can probably get a good lease deal through the company though, and all servicing costs go through the co.

I ran a TVR until they moved from the mileage bands and that was fine. I then switched to a Discover Van, but bought that from the co last year when they upped the tax..

G

[john_p]

I think for "your own" business it never really works out, as said above you'll pay a whacking amout of tax each year (say £15k, so ~£6k of real money?) AND still have to pay for the car through the business with money that you could draw as dividends anyway

[Exigeowner]

ok, my thinking was that if its new VAT could be claimed back, and also it would be 40 + K off our bottom line so that would be less corp tax they can get from me, and also if I pay my own cash I have also paid higher rate tax ( although dividends are paid too so poss slightly less )

[anonymous-user]

VAT can only be claimed back if it's a pool car(or van), so insure it for all employees and make sure you have a parking space at your place of work. That's what i understood of it anyway.

[thegreengoblet]

I still run a company vehicle - 2 year old Volvo XC90.

I don't think it's clear cut when it's your own business. Currently my company takes the hit on depreciation, servicing and running costs (excluding fuel). It gets a tax free allowance against the depreciation and any hp interest. Ok, the benefit in kind can be quite large, but I still think we are better off than taking dividends and buying the car and taking on all the costs ourselves. There will be a break point when the depreciation is minimised and how long you want to keep the vehicle. You need to speak to an accountant.

[wattsm666]

Exigeowner said:

ok, my thinking was that if its new VAT could be claimed back, and also it would be 40 + K off our bottom line so that would be less corp tax they can get from me, and also if I pay my own cash I have also paid higher rate tax ( although dividends are paid too so poss slightly less )

You can't claim the VAT back, and the cost of the vehicle is treated as capital not an expense, so you don't get a £40k deduction againist CT.

[Eric Mc]

In respect of Capital Allowances on Motor Cars, these are seriously restricted on an annual basis. If you did buy a car costing £40,000, you would be limited to an annual claim against your profits of £3,000.
Also, if you operate as a sole trader or a partnership. The annual allowance claim would normally suffer a further restriction due to the necessity to take into account private useage.
However, please note that there are some very generous Motor Car capital allowances for "environmentally friendly" cars (i.e. those with low CO2 ratings. Yoiu would need to look up the various rates etc before making any final decisions.

In a limited company, the private useage aspect of running a car is taken care of through the application of the Benefit in Kind rules.
Whether these turn out too penal to make a company car worthwhile is not that straightforward an answer anymore due to the complexity of the current car BIK rules. Like the situation with capital allowances, the BIK percentage used is lower thge lower the CO2 rating.

[thegreengoblet]

If you wanted to buy a £40k motor, how much gross income would you need? If you're a 40% tax payer, then surely it makes sense to get your £3k allowance and only pay tax at Corporation rates, at least for a few years? Especially on top of the expenses you can claim like insurance, tax, and running costs. And if you're a little savy with your choice and hence lower CO2 figures, then you can reduce your BIK liability as well.