Best car finance route for Ltd contractor
Discussion
I've got my own VAT registered Ltd company, and am looking to buy a new car (probably the new XKR). Are there any options to finance this through my company such that the overall net tax (ie the VAT/Tax savings less any additional taxes like BIK etc) would make it better than just buying the car privately?
I am a single Director company and hence have complete control over the route and options.
I thought that contract lease looks good as I save VAT on payments, but not sure whether this means that there is a BIK tax to pay. Also, if a car is bought through a company but just as a general company car, rather than for one particular employee, is there any BIK tax?
..oh yes, and the car will only do say 8k business miles per year.
I am a single Director company and hence have complete control over the route and options.
I thought that contract lease looks good as I save VAT on payments, but not sure whether this means that there is a BIK tax to pay. Also, if a car is bought through a company but just as a general company car, rather than for one particular employee, is there any BIK tax?
..oh yes, and the car will only do say 8k business miles per year.
Edited by kryten22uk on Sunday 16th July 18:04
Edited by kryten22uk on Sunday 16th July 18:09
I changed from trading as a Partnership to a Ltd company last year. At the time I was mid term on a contract hire RX300 Lexus which I was running through the old company, claiming back 50% of the vat etc. However when we became a Ltd company it worked out cheaper to simply remove the car altogether from the business and finance the payments myself; I now simply claim back milaege allowances for any business miles (40p per mile upto 10,000 & 25p per mile after) - this was solely down the the BIK car tax being so prohitively expensive on any juicy car - new XKR would be even worse as I would assume it will sit in the same Co2 bracket but have a higher list price.
As far as I am aware you cannot simply state any car as just a company car (i.e. pool car) unless it really is one. It would I imagine be pretty easy to prove that it was not given the type of car it is! There is provision in the tax rules for pool cars but obviously it is an area I am sure they are quick and keen to check up on; a quick google shows that "it would not for example be able to taken to or near your house overnight, it would need to be evident that it was not normally used by any single employee to the exclusion of others" etc etc
Of course everyone's tax situation is different so ultimately it is worth a word with your accountant who can base an opinion on your own figures and the way you extract your earnings (for me it is mostly as a dividend).
As far as I am aware you cannot simply state any car as just a company car (i.e. pool car) unless it really is one. It would I imagine be pretty easy to prove that it was not given the type of car it is! There is provision in the tax rules for pool cars but obviously it is an area I am sure they are quick and keen to check up on; a quick google shows that "it would not for example be able to taken to or near your house overnight, it would need to be evident that it was not normally used by any single employee to the exclusion of others" etc etc
Of course everyone's tax situation is different so ultimately it is worth a word with your accountant who can base an opinion on your own figures and the way you extract your earnings (for me it is mostly as a dividend).
You are looking at 35% of the list price (including options) as a BIK if the co pays all the running costs. At 40% thats going to mean additional personal tax in the region of £10K.
Probably not a lot in it in running it yourself and claining 40p/mile or letting the co pay and you paying the BIK!
Probably not a lot in it in running it yourself and claining 40p/mile or letting the co pay and you paying the BIK!
Gassing Station | Business | Top of Page | What's New | My Stuff