Benefit in Kind and leasing a car through the company

[Scubdup]

Hi all, hoping for some advice. After a bit of a mix up, I'm now struggling to see the benefit of getting my boss to get me a company car lease.

I'm looking at a BMW Touring 520d M.

To lease privately it looks like 8000mpa, 24 months, £2,457.97 deposit, £273.11 monthly instalments = £8739.5 inc vat

To lease through business it looks like 8000mpa, 24 months, £2,048.31 deposit, £227.59 monthly instalments = £7,510.47 ex vat.

But then through the business...

I need to pay tax on the benefit in kind which is my income tax rate of 40% on 21% of the book price of the car, £37,365 = £6268 over the 24 months

This effectively doubles the cost of the lease.

Vat is also payable, but half can be reclaimed by the company, so I need to add 10% = £751.05

But the company can claim back corporation tax relief on the cost of the hire at 21% = £1,577.20

So the total cost hiring through the company is £12,952.32, or £4,212.82 (48%) more.

I must be doing something wrong or missing something fundamental - thanks for any help or pointers.

[oop north]

You aren't missing much - with low mileage like that it isn't worth putting through the company. Just compare the bare lease cost with the taxable benefit in kind. I have done the maths many times (have a company) and even with mileage approaching 20k pa a 520d tourer is marginal

The proper comparison though is, instead of deducting corporation tax at 21% you should be deducting the tax that you save on the income that you are giving up - assuming that your employer would pay you a car allowance equal to the lease cost (though there is also insurance and maintenance / tyre cost to think of). Though you also need to consider national insurance, strictly, that's only going to be 2%

[Scubdup]

Thanks for that. Good to know I've haven't completely missed the point.

Basically I don't currently have a company car, and thought it might be cheaper to get one through the company than through a personal lease - the company said I'd have to pay for everything (through a salary deduction), but that any reliefs or rebates they would getthey would give back to me.

And writing that out, I've just realised the big omission I've made... The company lease would come out of my gross income, wouldn't it? Whereas my personal lease comes out of my income net of tax... Doh!

[oop north]

Yup

Glad to help - it is rather complex!

[edc]

Somethign is amiss with this.

Normally a company will incur the costs of a lease car and maintenance, insurance etc. You then simply pay the BIK tax.

In your scenario you are describing the cost of the car as being borne by the company (contractually) but you agree to cover the costs ... but then also get lumped with BIK tax.

There are also salary sacrifice car schemes which operate in a different way to the above.

[theboss]

National Insurance contributions are also payable in the company car scenario - 13.8% of the BIK paid by the company and a further 2% by you.

[Scubdup]

Thanks for the replies.

Basically, I need a new car, and asked my boss if I could get it through the company if it saved me any money. He said yes, and is happy to pass on any reliefs the company gets, so they don't profit from me doing so, but they're not contributing anything either.

Thanks Boss - I'll factor that into my calcs.

[andburg]

check out salary sacrifice as its essentially what you would have.. you would sacrifice the cost of the car from your own salary so its not a company car

[skilly1]

Have a look at an electric / hybrid car. If under 50g/km you only pay 5% BIK. Maybe look at the Mitsubishi outlander phev. Not great MPG after the intial 36 mile range on electric (36mpg) but you are not doing many miles anyway.

You can get free home charge installed from the goverment.