Leasing company car as a director?

[97lude]

Apologies if this has been asked before but I had a browse through the business forum and couldn't find any relevant threads.

I've set up a limited company with a turnover of approx £25-£30k pa and am intending on leasing a zero emissions car for when I travel to see my clients (roughly 6000 miles will be put through the business a year which works out to £2700 in mileage reimbursement at 45p per mile).

I've had a look at the BIK calculator for 2015/16 and for a car with a list price of approx £16,000 I'll be paying a BIK of approx £200.

If I lease the car through the business, would I still be able to claim for the mileage at 45p per mile? And would I receive corporation tax relief on the lease cost which will be approx £200 per month? Also, I read somewhere that the BIK charge for zero emissions cars is set to rise further in the 2016/17 year.

Any advice would be appreciated as I intend on starting the lease as soon as the new tax year begins. I'm unsure whether to lease personally or through the business.

Thanks

[Eric Mc]

If the company is leasing the car it is a "company car" and therefore the mileage claims would be based on the lower rates that apply to "company cars".

[sumo69]

97lude said:

I've had a look at the BIK calculator for 2015/16 and for a car with a list price of approx £16,000 I'll be paying a BIK of approx £200.

If I lease the car through the business, would I still be able to claim for the mileage at 45p per mile? And would I receive corporation tax relief on the lease cost which will be approx £200 per month? Also, I read somewhere that the BIK charge for zero emissions cars is set to rise further in the 2016/17 year.

2015/16 is a 5% BIK rate so you would pay £160 if basic rate taxpayer and £320 if higher rate.The company also pays Class 1A @ 13.8% of the benefit value of £800 as well. I don't have rates to hand but believe the rate increases to 9% and then 11% in subsequent tax years.

Company can deduct the whole lease payment from its income for tax purposes giving a reduction in the CT bill of £2400 @ 20% = £480.

Given the above, I believe you may be better paying this privately and claiming the 45p mileage allowance which is tax free for you and a valid expense for the company.

PM me if you want any more help.

David

[97lude]

sumo69 said:

2015/16 is a 5% BIK rate so you would pay £160 if basic rate taxpayer and £320 if higher rate.The company also pays Class 1A @ 13.8% of the benefit value of £800 as well. I don't have rates to hand but believe the rate increases to 9% and then 11% in subsequent tax years.

Company can deduct the whole lease payment from its income for tax purposes giving a reduction in the CT bill of £2400 @ 20% = £480.

Given the above, I believe you may be better paying this privately and claiming the 45p mileage allowance which is tax free for you and a valid expense for the company.

PM me if you want any more help.

David

Hi David,

Thanks for the reply, very useful info there.

I spoke to my accountant again, he said that as it's an operating lease, not a finance one (as I'm not taking ownership at the end of the lease period), I can claim CT relief on the business usage percent and the rest can be transferred to my directors loan account, so if it was 80% business use, 20% of the lease cost would be transferred to my directors loan. This means I would avoid paying any BIK whatsoever and my options could be expanded to a lower emission car such as an Audi A1 as long as the emissions are less than 95g per KM, what are your thoughts on this?

Thanks in advance.

[KarlS]

Something to consider as well. Was the new Limited Company set up recently? (have accounts been filed with Companies house yet?)

[97lude]

The company was set up in June 2013, would this have any implications on tax relief?

[KarlS]

I was thinking more along the lines of the business being in a position to be offered credit for a new vehicle, If it was only just set up.

You may still need a Director to guarantee with some funders when under 3 years trading, or put down a heftier initial payment.