Buying a car - through business?

OptiRick · Jul 12, 2010

Hi,

We are about to spend approx 5k on a car.

Is there any benefit generally from buying it through the business?

Ta,
Rick

MyAccountantOnline · Jul 12, 2010

OptiRick said:
Hi,

We are about to spend approx 5k on a car.

Is there any benefit generally from buying it through the business?

Ta,
Rick

Hi Rick

It very much depends on whether you are a soletrader or trading via a limited company first of all.

brclarke · Jul 12, 2010

Broadly speaking, from the tone of your question, the business can deduct costs that are wholly and exclusively for business purposes. Anything that is not a business expense but is for the director's personal use will attract tax in some way.

As a general rule for small, owner managed companies, it's often less tax efficient to run your car as a company car. Run it yourself and claim 40p a mile back from the company (tax free in your hands, an expense against CT for the company, 40p for the first 10000 miles, 25ppm thereafter).

I had a query re an apartment recently. The apartment was small and would double as the company's office as well as one of the director's residence.
If the director pays the company rent to the value of the BIK, the BIK charge is nil and the director pays less in rent/bills than if he rented the apartment privately. In this case it might be worth renting the apartment through the company.

Both scenarios are ones where you are best served talking to your accountant and getting the actual numbers crunched as each set of numbers will work out differently.

Martin Williams · Jul 13, 2010

You might like to consider leasing also; I believe that to be a little more beneficial from a tax point of view, but I'm not an accountant so I may be incorrect on that.

There is also the old saying; "if it depreciates, lease it!!"

All the best

Martin

MyAccountantOnline · Jul 13, 2010

Martin Williams said:
You might like to consider leasing also; I believe that to be a little more beneficial from a tax point of view, but I'm not an accountant so I may be incorrect on that.

There is also the old saying; "if it depreciates, lease it!!"

All the best

Martin

It is another option - again it very much depends on whether the person is trading as a soletrader/partnership or a limited company and the Co2 emissions of the car.

bovine · Jul 13, 2010

if it comes through the compay. then BIK would be due. On a second hand car of 5k, bik would be calculated based on the price of it new.

So, based on the info, its not worth putting it through the company unless it is solely for business use

FlashmanChop · Jul 13, 2010

Martin Williams said:
You might like to consider leasing also; I believe that to be a little more beneficial from a tax point of view, but I'm not an accountant so I may be incorrect on that.

There is also the old saying; "if it depreciates, lease it!!"

All the best

Martin

Or as my accountant and business associates always say, if if floats, flies or is fast, lease it!!

OptiRick · Jul 13, 2010

We are a limited company but as the vehicle doesn't get a lot of use private or business I am guessing it won't make a lot of difference.

I wondered about whether being able to write the depreciation off against CT would outweigh the personal loss involved in having it as a perk privately.

I do use a company for finance who will buy the vehicle, lease it to us and then sell it to us at the end of the lease for a token payment, might be worth speaking to them and obviously my accountant.

Given the small amount of money involved though I wonder if my time could be better spent.
I wouldn't have bothered at one time but given the way the government and the authorities have been behaving over the least few years I like to be as tax efficient as possible.

MyAccountantOnline · Jul 13, 2010

OptiRick said:
I wondered about whether being able to write the depreciation off against CT would outweigh the personal loss involved in having it as a perk privately.

Generalising here but probably very unlikely on a car costing £5k as you will be taxed on a percentage of its list price when new as a benefit in kind.

The very best thing you can do is to get your accountant to do the calculation for you before buying.

Lease4Less · Jul 13, 2010

Are you planning on taking the car on a HP agreement? If so then in this case leasing the car probably isn't that beneficial to you. There are a number of factors to consider when either purchasing or leasing a car through the company. Leasing often gets unfair criticism when it can be very tax efficient, but the customer is given terrible advice by the sales person trying to make a quick commission. If you are Vat registered then you can claim a 50% of the vat back and offset the other 50% against your taxable profit. (This only works of course if the vehicle is vat qualifying.)
With you being a Ltd company you will attract BIK if you fund the vehicle through the business and use it for any private mileage. I'd suggest buying it personally and charging a mileage to your company.
Hope this helps.

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