Reducing list price company car via interest free Employer loan

[stphnstevey]

Just reading this and wondered what people thought - if you had a company car for say £7000, this could then make the Company Car Benefit very minimal


If the car is held in the company it may be worth considering the employee contributing to the cost of the car. Contributions of up to £5,000 reduce the list price on which the taxable benefit is paid. If the employee has put some of his or her own money into the car, it will be cut in direct proportion to the amount invested. It is worth noting that a company can lend an employee up to £5,000 interest free without a benefit in kind being taxable on them.
Also saw this,


You have to crunch the numbers in every situation but generally you are better holding the car outside of your company, unless it is a very low emissions car which qualifies for a 100% capital allowance for the company.
Why would a 100% cappital allowance be so benificial? Any ideas what cars qualify?

Thanks

[ellbristow]

That's a very clever loop-hole in P11d law. Of course the £5000 still needs to be repaid to the employer but what a way to save interest and P11d tax.

With 100% capital allowances, you would be able to claim the whole value of the car in the first year and save a lot of tax. Also, low emission cars qualify for lower levels of P11d Benefits so would not be as heavy a hit to teh employees pocket.

There are very few cars which qualify for 100% CA. Most are electric or Hybrid. Most you would not want to be seen driving! :)

As a director however, you don't have to pay any P11d on a car that's outside the company. You would have to weigh up if the P11d saving is better than the Corporation Tax saving.

Remember that P11d is always on the list price, not the market value. The sting of Tax on Car benefit is often heavier and longer lasting than the joy of Tax savings!

If you need to calculate the P11d benefit of a car, check our site tools at www.rlagroup.net/tools.php (http://www.rlagroup.net/tools.php) . Theres a link to a very useful calculator.

[stphnstevey]

Found a list of the vehicles that qualify here - diesel's don't look to bad!

http://www.vcacarfueldata.org.uk/information/how-to-use-the-data-tables.asp#petrol

[David Griffiths]

Irrespective of the fact that there is no P11d charge for the notional interest on a loan of £5,000 or less, the company would still be liable to the rules relating to loans to participators. In other words it could be asked to shell out £1,250 with the corporation tax for that year, repayable if the loan is repaid in future, but not until the corporation tax for the year of repayment is due - 9 months after the year end. And go £1 over the £5k with some other loan, and the whole lot is subject to tax on the interest.

[stphnstevey]

So your saying that it will only be a 75% loan as 25% has to be paid to HMRC untill the loan is paid off, then it is refunded. Still doesn't sound bad

Are director's loans different to a loan to a non-director employee?