Buying a Car for my business?

[Work-Shy-Wanabe]

Sorry, I'm sure this has been asked before. I couldnt find an answer using search though.

I recently started a company and we need to buy a cheap diesel estate rep mobile.

The problem is that I’ve been told by an accountant that if I the company buys a car, it’ll get taxed something like 1/5 of its value annually.

He recommended that I purchase the car myself and then receive a £4000 running costs tax allowance.

One of the problems is I think the business would be in a better position to get finance than me personally. So buying the car myself could be a problem, unless I sell my current car.

We would much prefer to buy the car using the business, then pay for the fuel, parts, servicing, etc all from the business account. Why shouldn’t we do this?

[Plotloss]

Company car tax is opressive as your accountant has pointed out, if you put fuel through you have to pay private mileage seperately or take the tax hit on that as well.

The running costs of modern cars are tiny so its not like you're getting one over on the taxman from that perspective.

I would strongly urge you to listen to the accountant...

[Work-Shy-Wanabe]

He says I should buy a van!

He did say that I could cover the rear windows of an estate car and then try to persuade the DVLA that its a van. lol

What about leasing a car is that any good?


So I'm better off buying the car as my own then? Can I then claim runing costs from the business?

[Plotloss]

He's saying you should buy a van because vas attract flat rate tax of £400 rather than a percentage of the value like cars.

Van or rather commercials can be fairly flexible.

Until 2007 dual cab pickups are commercials, so you could lease one of them on a £400 tax deal, my mate is doing a brand new dual cab Mazda B series for around £199 per month on a lease...

[Work-Shy-Wanabe]

I'm after a Audi A6 Avant TDi(130) or VW Passat Estate TDi(130). Can he do me one of those for £199 per month? lol :-) Do you think they could be classed as commercial?

I suppose I need to face it and start looking at vans though really.

[Eric Mc]

Don't forget that the Benefit in Kind charge on vans is increasing dramatically next April.

There are some very interesting tax rules associated with small environmentally friendly vehicles. Have a look at the tax rates relatting to them as well.

[Don]

Eric Mc said:

Don't forget that the Benefit in Kind charge on vans is increasing dramatically next April. There are some very interesting tax rules associated with small environmentally friendly vehicles. Have a look at the tax rates relatting to them as well.

As I understand it the "van" advantage is being all but removed. This due to the many builders buying those four door pick up trucks with full leather, climate, seat back tellies etc which were conveniently classes as "vans".

Cars like the Toyota Prius can be run by the Company very tax efficiently. You just have to accept that its a Transport Utility Device rather than a car.

[Eric Mc]

Despite the Income Tax rules being tightened up on vans (and I mean "proper" vans, not van/car hybrids), the VAT will still be allowing Input VAT to be reclaimed on the overall cost of the van).

[Plotloss]

So they are going to tax pukka vans like cars?

Balls, there goes all hope of leasing a Lara Croft spec Defender Commercial...

[Work-Shy-Wanabe]

I've just spent the last hour looking at Vans on the web! VW Caddy in pearl black was my choice. A Lara Croft style defender sounds very appealing though! :-)


So the answer is don’t buy a company car/van, use my own and claim for it?


>> Edited by Work-Shy-Wanabe on Monday 9th January 15:10

[Plotloss]

Use your own and claim the business mileage at the full whack.

[Eric Mc]

The Benfit in Kind rules for vans are not going to be the same as for cars. Car BIKs are based on a percentage linked to the CO2 emission values for a specific models of car. From 6 April 2007, the van BIK will be a flat charge of £3,000 per annum. This charge will apply only if there is UNRESTRICTED private useage. If the only private useage of the van is home to work and other "incidental" private use, then the charge will not apply at all.

The current charge is £500 per annum.

[Work-Shy-Wanabe]

So Eric, what do you think I should do?

Buy a Audi A6 as my own and claim for it or the buy a company van?

[Eric Mc]

I've no idea, to be honest.

You will just have to sit down and do the sums - which Gordon Brown has made extremely complicated. Take into account -

You can claim back the VAT on the cost of the van.
The capital allowance claims on a van are more generous on a van and will not be restricted like they are with cars. However, Capital allowances are only worthwhile to a business if it is making profits. Otherwise they can only be utilised to augment the losses of the business. If the company is not making taxable profits therefore, capital allowances have limited value.

The Benefit in Kind on the van will almost definitely be less than the Benefit in Kind on a similarly priced car - even with the changes coming into effect in April 2007.

If you go down the car route, the pence per mile claim will be more beneficial to you probably (unless you decide to go for something escoteric, like an electric or hybrid powered car - which are treated very generously under the cutrrent BIK and Cpaital Allowance rules)..

Watch out for the recent changes to the Input VAT claims available on VAT on fuel costs paid under the pence per mile scheme.


Alternatively, ask your accountant to do the sums - that what he's there for.



>> Edited by Eric Mc on Monday 9th January 17:35

[Work-Shy-Wanabe]

Thanks for the advice.

I don’t think I'll be getting a van. I’ll discuss it in full with my accountant before I purchase but it’ll probably mean buying my self a car and claiming for it. I want a nice TDi daily car that I can use for the business and as my own personal commuter.

That way I can then buy the stupidest, fastest, unreliable and most outrages car I can afford as my proper car!! ;-) :-) lol