Van leasing and accounting - have I got this right?!
Discussion
My accountants on hols at the mo', so am turning to the expertise on here for a bit of advice after a weekend of tyre-kicking...
A bit of background - I am a 9-5 salaried employee, and me and the Mrs run a Ltd Co. as a side-line. We're both directors, but the company isn't at the stage of paying us any income yet (everything earned goes back into to co as we can live off what I'm earning at the mo).
Now...at the weekend I spied the Nissan Navara (4 seater-cab commercial vehicle) and have to say I rather liked it, so am looking at acquiring one. So, would I be correct in thinking the following would be possible:
Ltd Co leases the van - money for this and insuring it comes from company, any shortfall being made up by "capital investment" from my day-job salary.
As the van is owned by the company and used by the employees (me and the Mrs), then we would only be liable for BIK if we used it for private use...*however* (and this is the bit I'm thinking has got to not be right!) because neither of us are earning more than £8.5k from the Ltd co., we wouldn't actually be liable for any tax on the private use of the van?
Providing I can get the right price on the van, I wouldn't be using it to commute for the "day job" or any business travel related to this employment...although I would be interested to know how this could work if it had to...
Thanks in anticipation,
Rob.
A bit of background - I am a 9-5 salaried employee, and me and the Mrs run a Ltd Co. as a side-line. We're both directors, but the company isn't at the stage of paying us any income yet (everything earned goes back into to co as we can live off what I'm earning at the mo).
Now...at the weekend I spied the Nissan Navara (4 seater-cab commercial vehicle) and have to say I rather liked it, so am looking at acquiring one. So, would I be correct in thinking the following would be possible:
Ltd Co leases the van - money for this and insuring it comes from company, any shortfall being made up by "capital investment" from my day-job salary.
As the van is owned by the company and used by the employees (me and the Mrs), then we would only be liable for BIK if we used it for private use...*however* (and this is the bit I'm thinking has got to not be right!) because neither of us are earning more than £8.5k from the Ltd co., we wouldn't actually be liable for any tax on the private use of the van?
Providing I can get the right price on the van, I wouldn't be using it to commute for the "day job" or any business travel related to this employment...although I would be interested to know how this could work if it had to...
Thanks in anticipation,
Rob.
The BIK regulations relate to "Higher Paid Employees" (those earning AT A RATE OF £8,500 which includes the value of the benefit) and ALL directors (irrespective of their earnings).
Also, the legislation relates to the van being "available" for private useage.
Finally, is it a true "van" and not a "car". The Revenue have been agonising over the definitions of vans and cars over the past year or so as there are no quite a few vehicles which could be construed as either one or the other.
Also, the legislation relates to the van being "available" for private useage.
Finally, is it a true "van" and not a "car". The Revenue have been agonising over the definitions of vans and cars over the past year or so as there are no quite a few vehicles which could be construed as either one or the other.
Tyre Smoke said:
Not sure that you could convince the tax man that there was no private use at all either.
Well, looking at the rules for what would constitute personal use I'd definitely fall foul of them so wouldn't even try to convince the tax man otherwise.
However, on the HMRC website it says for tax to be paid for private use the employee or director would have to be earning more than £8.5k...although I can't find anywhere that clarifies whether this is just £8.5k out of the company who "owns" the van, or whether it's overall earnings from any source...
Rob.
Eric Mc said:
The BIK regulations relate to "Higher Paid Employees" (those earning AT A RATE OF £8,500 which includes the value of the benefit) and ALL directors (irrespective of their earnings).
Also, the legislation relates to the van being "available" for private useage.
Finally, is it a true "van" and not a "car". The Revenue have been agonising over the definitions of vans and cars over the past year or so as there are no quite a few vehicles which could be construed as either one or the other.
Also, the legislation relates to the van being "available" for private useage.
Finally, is it a true "van" and not a "car". The Revenue have been agonising over the definitions of vans and cars over the past year or so as there are no quite a few vehicles which could be construed as either one or the other.
It's one of the "treading the fine line" vehicles...4-seater cab with the refinements of a car, but is sold as a commercial vehicle and it's classified as a van for insurance. So probably one of the ones which has been causing the Revenue's agonising!
So...basically because I'm a director and it would unquestionably be used for private usage, then I would be liable for the £500/£3000 (depending on tax year)?
Rob.
Yes.
However, the private useage definition is more generous for vans compared to cars. With vans, "incidental" private useage can be ignored. This is a rather vague term but it seems to encompass home to work commuting and using the van occasionally for trips to the local tip or such like or other journeys when a car isn't suitable.
Using the "van" in lieu of your car for "normal" private useage would definitley fall foul of the BIK tax charge.
The £8,500 lower limit does not apply to directors.
The £8,500 includes salary AND benefit combined
The £8,500 is pro-rata'd so an employee who was employed for six months would need to be taxed if the salary and benfit exceeded £4,250.
However, the private useage definition is more generous for vans compared to cars. With vans, "incidental" private useage can be ignored. This is a rather vague term but it seems to encompass home to work commuting and using the van occasionally for trips to the local tip or such like or other journeys when a car isn't suitable.
Using the "van" in lieu of your car for "normal" private useage would definitley fall foul of the BIK tax charge.
The £8,500 lower limit does not apply to directors.
The £8,500 includes salary AND benefit combined
The £8,500 is pro-rata'd so an employee who was employed for six months would need to be taxed if the salary and benfit exceeded £4,250.
Thanks for the responses guys...plenty of food for thought.
Choices either seem to be to limit the usage of the van to anything which can be construed as business news (don't think this will actually be massively restrictive), resign as director, or earn more money so I can afford the pay the tax...
Thanks again,
Rob.
Choices either seem to be to limit the usage of the van to anything which can be construed as business news (don't think this will actually be massively restrictive), resign as director, or earn more money so I can afford the pay the tax...
Thanks again,
Rob.
Resigning as a formal director may not be of any use. A company MUST have a director. If you resigned, who would replace you?
Also, even if you are not a formal director, you will still have a "control relationship" and are still a de facto "director". Consequently, you would still be looked on as a director for tax purposes.
Also, even if you are not a formal director, you will still have a "control relationship" and are still a de facto "director". Consequently, you would still be looked on as a director for tax purposes.
The missus is a director also...though might need to revise the memorandum and articles of association, as I seem to recall something in there declaring the company would run with at least two directors...
Although if I'd still be regarded as a director because of the number of shares held, it's not going to be especially worthwhile!
So that leaves options 1 and 3...
Rob.
Although if I'd still be regarded as a director because of the number of shares held, it's not going to be especially worthwhile!
So that leaves options 1 and 3...
Rob.
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