Company Finance question re funding a car for director

[paul001]

Not sure if this is possible but thought worth the question anyway!

Looking to replace my car in the next couple of months - was planning on buying outright (secondhand) but thinking rather than trading my current car in and then personally buying a car I might be better off selling mine and lumping some extra cash into the business. The company is very profitable and doing well, not effected by current climate due to the nature of it etc etc but anyway my main question is this.

When I started the business, due to it being brand new I couldn't raise credit anywhere so I put in as much as I possible could trading on my own credit cards etc and as a result of growth and past cashflow probs I completely wrecked my personal credit rating so now looking at silly APRs for car finance if I chose this route. My company on the other hand has an A1 credit rating. I don't want to have the car on the books as it would obviously then be a company car and would cost me more in tax so is there a way around this at all? Somehow using the company to finance the car without it being a company car - I'm fairly sure the answer is a big fat no and will probably just have to stick with the original plan of buying personally for cash.

Edited by paul001 on Sunday 19th April 20:45

[ianash]

There is no reason you couldn't buy a car through your company and then you rent it from the company. Providing you are paying the company the same amount it is paying the finance co, they'll be no benefit and no tax.

[paul001]

Thanks - not even thought about that possibility - would it not be viewed by HMRC though as some kind of way around not forking out Co. car tax? I know they like to screw at every available opportunity and seems like this might be something they would not take a keen view on?

[ianash]

Nope, if there is no financial benefit to you, they'll be no tax. There might be a VAT issue though.

[paul001]

Seems like a very good option then - Good point on the VAT element although that would be on a lease basis mainly and I was looking more at HP deals as the car would be 3-4 years old anyway and I believe VAT wont play a part on that type of agreement.

Thanks for the help!

[anonymous-user]

DON't get a company car, buy a nice second hand car over 2 liters, and charge your company for 'using your car for employers business', using the 'fixed profit car scheme', (get the booklet form HRM and read it), rates are set for depreciation on a big jag, Merc, BMW, etc in the first three years, if you buy one that doesn't have this high level of depreciation you will be pounds in. It is much the best way to go if you are the Director/Owner of the company.
Last Company I had in the UK I ran a 3 year old 7 series that had been owned by the Chairman of a PLC, full service history, great spec, and no depreciation while I kept it and the tax man paid me nearly 50p a mile to run it.

[Martial Arts Man]

ianash said:

There is no reason you couldn't buy a car through your company and then you rent it from the company. Providing you are paying the company the same amount it is paying the finance co, they'll be no benefit and no tax.

We did that at my old company for an employee who couldn't raise the credit himself.

No issues, as long as it is done correctly.

[Brown and Boris]

Martial Arts Man said:

ianash said:

There is no reason you couldn't buy a car through your company and then you rent it from the company. Providing you are paying the company the same amount it is paying the finance co, they'll be no benefit and no tax.

We did that at my old company for an employee who couldn't raise the credit himself.

No issues, as long as it is done correctly.

oh, oh, oh. My company has an Elise they own outright but which we only tax for 4 or 5 months a year because of the company car tax issue (and the weather).

So, if they rented it to be for 12 months a year, I would pay no company car tax??? Sounds too good to be true. Could they rent it to me for £5 a month?


Why isn't everyone doing this?

[ianash]

Brown and Boris said:

Martial Arts Man said:

ianash said:

There is no reason you couldn't buy a car through your company and then you rent it from the company. Providing you are paying the company the same amount it is paying the finance co, they'll be no benefit and no tax.

We did that at my old company for an employee who couldn't raise the credit himself.

No issues, as long as it is done correctly.

oh, oh, oh. My company has an Elise they own outright but which we only tax for 4 or 5 months a year because of the company car tax issue (and the weather).

So, if they rented it to be for 12 months a year, I would pay no company car tax??? Sounds too good to be true. Could they rent it to me for £5 a month?


Why isn't everyone doing this?

If the Revenue think you're taking the piss, they'll put a value on the perceived value of the "benefit" and tax you accordingly. If I were you I'd stand for parliament, then all your benefits will be tax free. HTH

[Super Bad]

ianash said:

If I were you I'd stand for parliament, then all your benefits will be tax free.

[lenientism]

That's nice for owning a very profitable and high resistance against unfavorable environment typical of business, what business is it?...

If you try to implement the rule professionally, I think you have to treat yourself like any other employee, being paid and buy the car personally. You can also use the company as institution with the A1 rating to support funding the car ownership, your employee might have the same opportunity on the program. The car might be also basically asset used for operational of the company. However you have more flexibility choosing which program is greatly beneficial for yourself and also the company.

Edited by lenientism on Tuesday 21st April 05:57

[Deva Link]

Brown and Boris said:

Why isn't everyone doing this?

..because, despite what many people say, for ordinary employees having a company car is still a good deal.

In my last large company job, we reduced the company car tax by making a contribution towards the cost of the car. I can't be bothered to do the maths, but if you contributed enough then you wouldn't have any tax liability. Don't forget that you're paying the company back from your own taxed income.

Of course, the position is more complicated if it's your own company and you're effectively paying for the car with you own (company) money and then paying personal tax on on having a company car.

[john_p]

I think for owner-directors it's really hard to justify unless you buy some super-economical car that escapes all taxes known to man. Otherwise the BIK hits you along with the 'lost' profits.

[Pharoah]

When you decide how you want to finance it - through the company or in your own name drop me a pm as I can arrange cheap finance through Lombard if you want (I work there).

[LivinLaVidaLotus]

Berw said:

DON't get a company car, buy a nice second hand car over 2 liters, and charge your company for 'using your car for employers business', using the 'fixed profit car scheme'

AFAIK that doesn't exist any more does it? I thought it was scrapped and replaced with the fixed mileage allowances?