Discussion
My own LTD company bought a company car for me outright.
So I'm paying bik on it yearly. And it's depreciating on my business accounts. Which is fine
After 4 years the asset on my balance sheet will be zero.
If I wanted to transfer ownership of the car to myself. I assume HMRC would see this is a gift and I would pay tax on that and it would possibly be included on my p11d?
For arguments sake the car is worth £30k and I'm a higher rate tax payer who would have lost personal allowance.
How much tax would I pay to keep the car personally rather than the business sell it. I've tried googling it but I can't find the answer.
Apologies in advance I've never really understood P11D etc.
( Yes its my own business but there are reasons why it would be beneficial for me to own the car not the business)
So I'm paying bik on it yearly. And it's depreciating on my business accounts. Which is fine
After 4 years the asset on my balance sheet will be zero.
If I wanted to transfer ownership of the car to myself. I assume HMRC would see this is a gift and I would pay tax on that and it would possibly be included on my p11d?
For arguments sake the car is worth £30k and I'm a higher rate tax payer who would have lost personal allowance.
How much tax would I pay to keep the car personally rather than the business sell it. I've tried googling it but I can't find the answer.
Apologies in advance I've never really understood P11D etc.
( Yes its my own business but there are reasons why it would be beneficial for me to own the car not the business)
chinnyman said:
For arguments sake the car is worth £30k and I'm a higher rate tax payer who would have lost personal allowance.
How much tax would I pay to keep the car personally rather than the business sell it. I've tried googling it but I can't find the answer.
You're effectively receiving A BIK of £30k so that's the amount you would have to pay tax on. If you've lost all your personal allowances then that suggests you're in the additional rate band so the tax would be 45% of £30k. On top of this your company will have to pay NI.How much tax would I pay to keep the car personally rather than the business sell it. I've tried googling it but I can't find the answer.
chinnyman said:
So not too dissimilar if the company sold the car and I took a dividend out of the same value.
Indeedchinnyman said:
How is the car value determined fairly?
Good question! For HMRC purposes I would suggest a WBAC or Motorway quote should be sufficient. Alternatively I suppose you could get a more "BIK-friendly" valuation done from a local mechanic... 
It depends how risk averse you want to be.Mr Pointy said:
Given the car is fully depreciated to £0 asset value after four years why don't you buy it from the business for £0?
not entirely serious
More realistically if the asset is down to zero in the books, why can't it be sold for nominal amount?
Because it's a massive tax dodge.not entirely serious
More realistically if the asset is down to zero in the books, why can't it be sold for nominal amount?
Countdown said:
Mr Pointy said:
Given the car is fully depreciated to £0 asset value after four years why don't you buy it from the business for £0?
not entirely serious
More realistically if the asset is down to zero in the books, why can't it be sold for nominal amount?
Because it's a massive tax dodge.not entirely serious
More realistically if the asset is down to zero in the books, why can't it be sold for nominal amount?
Countdown said:
Mr Pointy said:
But is there an actual requirement in tax law to sell a depreciated asset for the maximum amount achiveable in the market?
Why would you not, unless it was a tax dodge?Mr Pointy said:
Because as a PSC the director & shareholder can make the financial decisions that affect the profitability of the company? If the OP sells the car to a third party is he still required to obtain the maximum price in the market? Yes the company profitability will suffer, but that's his choice.
The loss to the Company will be LESS than the gain made by the person the asset is "sold " to (because part of the loss will be offset against tax).It's not a genuine sale. It's a way of transferring the benefits of tax relief to the OP personally. This is apparent to HMRC which is why there are specific rules for disposing of assets to connected parties.
Mr Pointy said:
But is there an actual requirement in tax law to sell a depreciated asset for the maximum amount achiveable in the market?
The company can do what it likes with its assets, if it wants to give everything away they are quite entitled to do so. But whoever receives the asset will have to account for it and, where such a transfer is done at a price that is clearly lower than the fair market value, you can expect HMRC to take a close look.Have you been claiming Capital Allowances on this asset?
HMRC is more interested in the tax Written Down Value of the car rather than the Net Book Value of the car as shown in the company's balance sheet.
These will be different as the rate of Capital Allowance applied to cars is much lower than the depreciation rate that has been applied in the accounts.
You say that the car will soon be at a Zero value in the balance sheet. That indicates that you have been applying 25% or maybe 20% depreciation to the asset on what is called the "straight line basis".
The tax Written Down Value will most likely be a lot higher than Zero because the Capital Allowance claim will have been made at an annual rate of 18% or 6% on a Reducing Balance basis. Unless the car is a special category of car, i.e. an electrically powered car where the Capital Allowance rates are more generous.
HMRC is more interested in the tax Written Down Value of the car rather than the Net Book Value of the car as shown in the company's balance sheet.
These will be different as the rate of Capital Allowance applied to cars is much lower than the depreciation rate that has been applied in the accounts.
You say that the car will soon be at a Zero value in the balance sheet. That indicates that you have been applying 25% or maybe 20% depreciation to the asset on what is called the "straight line basis".
The tax Written Down Value will most likely be a lot higher than Zero because the Capital Allowance claim will have been made at an annual rate of 18% or 6% on a Reducing Balance basis. Unless the car is a special category of car, i.e. an electrically powered car where the Capital Allowance rates are more generous.
deckster said:
The company can do what it likes with its assets, if it wants to give everything away they are quite entitled to do so.
I'm afraid that's not true. The director(s) have to act in the best interests of the company, so in some circumstances, that may go against the Companies Act provisions. Also when the third party is connected, there are rules that must be adhered to.Eric Mc said:
Have you been claiming Capital Allowances on this asset?
HMRC is more interested in the tax Written Down Value of the car rather than the Net Book Value of the car as shown in the company's balance sheet.
These will be different as the rate of Capital Allowance applied to cars is much lower than the depreciation rate that has been applied in the accounts.
You say that the car will soon be at a Zero value in the balance sheet. That indicates that you have been applying 25% or maybe 20% depreciation to the asset on what is called the "straight line basis".
The tax Written Down Value will most likely be a lot higher than Zero because the Capital Allowance claim will have been made at an annual rate of 18% or 6% on a Reducing Balance basis. Unless the car is a special category of car, i.e. an electrically powered car where the Capital Allowance rates are more generous.
From memory claimed capital allowances in the first year.HMRC is more interested in the tax Written Down Value of the car rather than the Net Book Value of the car as shown in the company's balance sheet.
These will be different as the rate of Capital Allowance applied to cars is much lower than the depreciation rate that has been applied in the accounts.
You say that the car will soon be at a Zero value in the balance sheet. That indicates that you have been applying 25% or maybe 20% depreciation to the asset on what is called the "straight line basis".
The tax Written Down Value will most likely be a lot higher than Zero because the Capital Allowance claim will have been made at an annual rate of 18% or 6% on a Reducing Balance basis. Unless the car is a special category of car, i.e. an electrically powered car where the Capital Allowance rates are more generous.
Yes its depreciating 20% each year on our accounts.
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