Buying car through ltd co

[der1]

As the title suggests I'm weighing up the prospect of using spare cash in my ltd co to purchase a car.

Accountant has advised against it as I'll have to pay Bik etc.

The way I see it is the cash is there and there's cash available to pay any tax liability so what's the big deal...

[Eric Mc]

You will pay tax every year you have the car - so if you like paying lots of tax (and NI as well) by all means go ahead.

[SS2.]

Weigh up the total costs - privately owned / leased vs company owned / leased.

If company owned (and for as long as the company owns the car), you'll be liable for BIK tax and the company will be liable for Class 1A NICs.

If privately owned, whilst you'll pay for the car with taxed earnings, there would be no additional earnings related tax for you or the company to pay.

[der1]

Excuse my ignorance but Do hmrc have a "calculator" of sorts to work out the yearly tax ?

[SS2.]

There's loads on the 'net - here, for instance.

The tax liabilities are calculated from the vehicle's CO2 emissions and its price when new.

What car were you thinking of buying ?

[der1]

Thanks for that!

RRS svr but on second thoughts I'll pass!!

[Eric Mc]

I had an identical conversation with a client last week. As soon as I pointed him in the direction of some of those calculators and he did some basic calculations - he passed too.

Unless the company acquires a "special" vehicle of some sort - such as extremely low or even no emission vehicle, or the vehicle is classified as a "commercial vehicle" rather than a "motor car", then the tax tends to be prohibitive.

If you are willing to look at low emission/electrics/commercials - then you might be surprised at how much better the tax position is, especially when you also factor in the Capital Allowances that may be claimable on the vehicle.

[Steve57]

So the likes of a Tesla? been looking at swapping two cars at home into one, a model X would fit the bill and even better if i could put that through.

[Eric Mc]

Here's the HMRC calculator.

http://cccfcalculator.hmrc.gov.uk/CCF2.aspx

As the Tesla is 100% electric, the Benefit in Kind tax position should be pretty good.

The car will also attract very good capital allowances so when purchased it can seriously reduce your Corporation Tax liability in the year of purchase.

You do need to be careful regarding the type of finance you use when acquiring the vehicle. If you go for a lease type arrangement, you will not be able to claim the capital allowances. If you buy outright, buy using a bank loan or buy using MOST HP agreements, you should be able to claim the Capital Allowances..
You should read the small print very carefully when acquiring a vehicle (or any asset for that matter) using finance.

[dfen5]

Why not just pay yourself a dividend and buy privately?

[Eric Mc]

Up until 5 April 2016 that was a relatively cost effective way of doing it.

However, since 6 April 2016, there is an Income Tax charge on dividends of 7.5% between £5,001 and the point where Higher Rate tax kicks in.

On 6 April 2018, that £5,000 threshold is dropping to £2,000.

So, doors are being gradually closed.

[Zoon]

Eric Mc said:

Up until 5 April 2016 that was a relatively cost effective way of doing it.

However, since 6 April 2016, there is an Income Tax charge on dividends of 7.5% between £5,001 and the point where Higher Rate tax kicks in.

On 6 April 2018, that £5,000 threshold is dropping to £2,000.

So, doors are being gradually closed.

But there are no other better options as far as I can tell.
Certainly not on buying an SVR

[der1]

Eric, would I not still pay roughly £40k in tax going down the dividend road ?

[Eric Mc]

Sorry, I don't do personalised tax calculations on the forum

[Eric Mc]

Zoon said:

Eric Mc said:

Up until 5 April 2016 that was a relatively cost effective way of doing it.

However, since 6 April 2016, there is an Income Tax charge on dividends of 7.5% between £5,001 and the point where Higher Rate tax kicks in.

On 6 April 2018, that £5,000 threshold is dropping to £2,000.

So, doors are being gradually closed.

But there are no other better options as far as I can tell.
Certainly not on buying an SVR

Exactly as the government would want.

[Zoon]

der1 said:

Eric, would I not still pay roughly £40k in tax going down the dividend road ?

Around £46k if 40% taxpayer

[Zoon]

Zoon said:

Around £46k if 40% taxpayer

Lease it privately and pay for the rentals through your wages.
Best way I can see of doing it.

[SS2.]

der1 said:

Eric, would I not still pay roughly £40k in tax going down the dividend road ?

Probably simplest to run the numbers through one of the online dividend calculators.

As Eric has already pointed out (and as I understand it), there's no tax to pay on the first £5k of dividends (for this year, at least), then it's 7.5% tax charge if you're within the basic rate band (£45,000 for 2017/2018), then 32.5% tax when you go above this.

Additional taxes would also kick in on anything over £150,000.

[DSLiverpool]

der1 said:

As the title suggests I'm weighing up the prospect of using spare cash in my ltd co to purchase a car.

Accountant has advised against it as I'll have to pay Bik etc.

The way I see it is the cash is there and there's cash available to pay any tax liability so what's the big deal...

Has the "car through a LLP" ship sailed ?