BIK / Dividend / Corporation tax question
Discussion
Hello all,
Despite being a confirmed petrolhead, the reduction to BIK in FY20/21 has caught my attention and I am hoping that someone here can help me with the following tax query.
So, I run a small company that has capital reserves. Let's say I want to acquire a Tesla X and am trying to balance purchase vs PCP vs just extracting the funds as dividends.
If we assume the purchase price is £100k and my company buys the car, I think that means I can offset the full £100k against profits in the current year. That gives me a £19k saving on corporation tax and (assuming this all happen in the next FY) nil BIK. On the other hand, if I don't buy the car but just extract the £100k as dividend I effectively pay 38.1% dividend rate tax on the £81k, leaving me c.£50k in my pocket. I'm trying, but mostly failing, to weigh up the total cost to me of buying the car vs just extracting the cash and spending it on a petrol car. Help me understand please!!
Then, if I decide not to buy the car but to PCP, can I offset the full PCP monthly cost against corporation tax?
I will run via my accountant, but I'm hoping that some of you EV experts will offer a steer!
Thanks in advance.
Despite being a confirmed petrolhead, the reduction to BIK in FY20/21 has caught my attention and I am hoping that someone here can help me with the following tax query.
So, I run a small company that has capital reserves. Let's say I want to acquire a Tesla X and am trying to balance purchase vs PCP vs just extracting the funds as dividends.
If we assume the purchase price is £100k and my company buys the car, I think that means I can offset the full £100k against profits in the current year. That gives me a £19k saving on corporation tax and (assuming this all happen in the next FY) nil BIK. On the other hand, if I don't buy the car but just extract the £100k as dividend I effectively pay 38.1% dividend rate tax on the £81k, leaving me c.£50k in my pocket. I'm trying, but mostly failing, to weigh up the total cost to me of buying the car vs just extracting the cash and spending it on a petrol car. Help me understand please!!
Then, if I decide not to buy the car but to PCP, can I offset the full PCP monthly cost against corporation tax?
I will run via my accountant, but I'm hoping that some of you EV experts will offer a steer!
Thanks in advance.
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