Best way to get new freelander

Chris Ashdown · Apr 25, 2010

Standard rate tax payer looking to lease purchase new Freelaner 2 deisel about £23000

Expect about 10000 mles per year private an business 50/50 private/ Business use

Probably on 4 year lease purchase

Company is vat registered, single user for car

What is the best way to do this either company or personal lease

what does it cost either way to the person in extra taxes etc

How much extra pay would person have to have to have negative effect on earnings under £27000

Many thanks

newcarcontracts · Apr 26, 2010

Good morning, I'll be happy to work out lease purchase / company car tax figures for you - if you can let me know which model Freelander you're after I'll let you know what I can offer. Feel free to PM me if you prefer.

Cheers, Richard.

Chris Ashdown · Apr 26, 2010

Hi There

Just the basic car with metalic paint

newcarcontracts · Apr 26, 2010

PM Sent, cheers Chris.

juststartingout · Apr 26, 2010

I haven't leased before, but someone suggested it as it might work out cheaper for my business. I run a limited company, and am a basic rate taxpayer. What does a lease include (maintenance, insurance etc?)? I would be using the car for both business and personal use, if the lease was in the company name what percentage of it could I claim back? Would it be better for me to buy a secondhand car personally and then charge the 40p per business mile? If my company buys or leases a car can we claim back petrol costs? Thankyou.

newcarcontracts · Apr 27, 2010

Good morning,
Contract hire is the most popular form of leasing a car for a business. Effectively you are hiring the vehicle for a set period of time and at the end you just hand it back to the finance company with no further obligation. The agreements are generally 24 to 48 months long and the monthly rentals are calculated based on the mileage you expect to cover in the period. We can also include maintenance / servicing for an additional premium, or you can have a basic hire agreement and pay for this as & when it's required. You have to arrange your own comprehensive insurance as this is not included in the leasing costs.

For businesses, the rentals are plus VAT and 50% of the VAT is reclaimable on the finance element of the rental assuming you are VAT registered. If you take a maintenance contract, all the VAT is reclaimable on the maintenance portion of your monthly rental.

As far as the tax man is concerned, a contract hired vehicle is not an asset of yours so does not go on your balance sheet. You can offset the monthly rentals against your taxable profits.

The question of whether it's worth you buying a used vehicle and charging the company for business mileage would depend completely on what type of car you want to drive and what mileage you cover. It may be that a fuel-efficient company car with low co2 emissions has such a low company car tax liability that you are happier for your company to provide the car & insurance.

Hope this helps - feel free to PM me if you'd like any specific quotations.

Cheers, Richard.

FlashmanChop · Apr 27, 2010

Hi Richard,

I am in a similar situation, can the full cost of rental be off set against Tax ?

so if i have income of £1,000, I can off set the cost of the contract hire, so £1,000 - £500 = £500 ddt tax ?

newcarcontracts · Apr 27, 2010

Hi FlashmanChop,

Yes the rentals can be offset against your corporation tax. - For vehicles over £12,000 a proportion is allowed - and calculated using the 'half the difference' rule.

so for example if you have a car at £18,000, here's how you calculate it.

£18,000 less the £12,000 = £6,000 (difference between list price and the £12,000 threshold)
Divide this by 2 = £3000
Add the £12,000 = £15,000
Divide by vehicle cost (£18,000) = 0.83
Times 100 to get the percentage you can offset = 83% of rentals.

Clear as mud. Always a good idea to check with your accountant as I'm not one!

FlashmanChop · Apr 27, 2010

Thanks Richard,

I will be in the market for shortly for:-

a) a short term rental, possibly 3-6 Months,

b) a private car, also fr business use, possibly Discovery 4/RRS, not fully sure yet - so may drop you a line.

ps I will check with my accountant... just to be sure!

Thanks

David Griffiths · Apr 27, 2010

newcarcontracts said:
Hi FlashmanChop,

Yes the rentals can be offset against your corporation tax. - For vehicles over £12,000 a proportion is allowed - and calculated using the 'half the difference' rule.

so for example if you have a car at £18,000, here's how you calculate it.

£18,000 less the £12,000 = £6,000 (difference between list price and the £12,000 threshold)
Divide this by 2 = £3000
Add the £12,000 = £15,000
Divide by vehicle cost (£18,000) = 0.83
Times 100 to get the percentage you can offset = 83% of rentals.

Clear as mud. Always a good idea to check with your accountant as I'm not one!

Those calculations are out of date as of April 2009. From that date the disallowance is fixed at 15%

Budget Note 65 2009

newcarcontracts · Apr 28, 2010

David Griffiths said:
Those calculations are out of date as of April 2009. From that date the disallowance is fixed at 15%

Budget Note 65 2009

Thank you for the update - I was not aware of that.

elaine@cheapaccounting · Apr 28, 2010

newcarcontracts said:
Thank you for the update - I was not aware of that.

That is a bit worrying if you are advising people to make financial decisions based on out of date information.

What else have you not kept up with

newcarcontracts · Apr 28, 2010

Fair point and apologies! Always best to check with your accountant on the intricacies of lease allowances and such like as I mentioned.

FlashmanChop · Apr 28, 2010

So, to summarise for the non accounts….

Scenario:-

Car, Landrover Discovery on Contract Hire - £800/Month
Allowance deductable for tax purposes:- 15% = £-120

What else is deductable for the purposes of tax?

Fuel / milage for business ?
Running Costs ? (based on business sue only - s a %)

Anything else?

Thanks

newcarcontracts · Apr 28, 2010

As far as I am aware, and hopefully one of the accountants will be along to confirm shortly, your costs for insuring & servicing the vehicle can be written off against tax. If the company reimburses the staff member for business mileage then this is also allowable.

Can anyone confirm this is correct?

juststartingout · Apr 29, 2010

David Griffiths said:
Those calculations are out of date as of April 2009. From that date the disallowance is fixed at 15%

Does this mean you can only claim 15% of the rental? Say I have a £20 000 car on a lease, by the calculations above I should be able to claim back 80% of the cost of the lease, not just 15%! Are the numbers above completely wrong then?

Also, I have a young employee (he's almost 20) who I would like to lease for. However, we work in an industry where image is everything, so it needs to be something quite upmarket. Does anyone have any suggestions (particularly you, newcarcontracts) for something he could drive? Most of our clients etc drive Jaguars, Mercedes, BMWs etc etc. However, as he's young I'd imagine that the insurance on a car like that would be outrageous (I didn't learn to drive until I was twenty five so I wouldn't know)? Could you give me some idea of how expensive it might be? I believe he passed his test about a year ago but has not had a car of his own, or been on anyone else's insurance during that time. How about a Mini Cooper? Would this be more realistic? Have you got any idea then?

I'd be interested to hear your suggestions. Also, could we claim the full cost of insurance, servicing etc back as a business expense?
Thank you.

David Griffiths · Apr 29, 2010

juststartingout said:
Does this mean you can only claim 15% of the rental? Say I have a £20 000 car on a lease, by the calculations above I should be able to claim back 80% of the cost of the lease, not just 15%! Are the numbers above completely wrong then?

.

The clue is in the word disallowance - 15% disallowed 85% claimed.

newcarcontracts · Apr 29, 2010

I read the flat rate of disallowance at 15% being that the remaining 85% can be allowed against tax. I will PM more leasing details to you.

Kind regards,
Richard.

FlashmanChop · Apr 29, 2010

I must put my glasses on.. I read it the other way round.. but i will happily claim 85% off agianst tax....

elaine@cheapaccounting · Apr 29, 2010

have you covered off the benefit in kind issues and class 4 NI paid on BIK by company - I assume these will be taken into account in your calc.

David Griffiths · Apr 29, 2010

If I had £1 for every time I'd written something and a client had read it completely wrongly . . . .

Probably make more money if I had the £1 for every time the client didn't read it at all!

FlashmanChop · May 1, 2010

I know I know... kind of been a long week.. dare not add up the hours...

juststartingout · May 3, 2010

Likewise, sorry!

FlashmanChop · May 3, 2010

so, we have estbalished that we can off set 85% of a contract cars cost against tax, for business use only,

what else..

juststartingout · May 5, 2010

Well the advice was provided when I said that I would use a lease vehicle for business and personal use...

newcarcontracts · May 5, 2010

Insurance / maintenance can also be written off against tax.

Wild Goose · May 5, 2010

elainec100 said:
have you covered off the benefit in kind issues and class 4 NI paid on BIK by company - I assume these will be taken into account in your calc.

Maybe there's a business opportunity here Elaine? This issue's going in circles, and cries out for two columns of calcs: one for if the company leases with everything including BIK, maintenance, insurance, and tax relief factored in; and the other for if the employee leases and charges back to the company @ 40p a mile.

Business Opportunity? Ummm I think I mean something along the lines of one-off answers to specific tax questions @ oh I dunno £50 a time; I mean, at the end of all this thread the buyer will be none the wiser because there will inevitably be the swings and roundabouts of some unanticipated extra cost or tax break to factor into the decision after the event. I've just been reading about a guy in another thread who's trying to decide whether to set up a company here or in Denmark - loads of snippets of advice, but nothing all-encompassing. See what I mean? He'll end up moving his business and maybe himself to Denmark based on the odd pearl or two of wisdom that he has randomly collected from the UKBF thread that is his oyster. Bet he'd pay £100 to have his question answered.

I know, I know, answering a question fully and definitively for £50 will not get you on the rich list; and yet we (collectively) continue to dispense advice via the painful piecemeal process and, pro-bono to boot.

I know all the reasons the OP might prefer not ask his accountant for advice on this matter: he might have to wait days just to run up a cricket score of a bill just to get an unclear answer. But I wonder how many UKBF members would be willing to pay £50 for a one-off solution.

David Griffiths · May 5, 2010

£50? No thanks.

The OP posted a wide ranging question, with incomplete data, so it's not actually possible to answer it. By the time that you'd gathered the missing information, and done all the sums it wouldn't be worth it.

And bet your bottom dollar that in many cases the questioner would come back with a few what-ifs which they'd expect answered within the original £50. (That's not aimed at the actual OP in this thread by the way!)

As to the Denmark query, if he was prepared to pay he'd have to use a firm that was as familiar with Danish tax and law as with the UK's. A bit more than £100 I think

Who would be allowed to answer these questions, by the way? There are plenty of people on UKBF who seem quite happy to jump in with their viewpoint when they clearly don't know what they are talking about. Again I'm not referring to this thread in particular, but the first answer given was in fact wrong.

elaine@cheapaccounting · May 5, 2010

Wild Goose said:
Maybe there's a business opportunity here Elaine? This issue's going in circles, and cries out for two columns of calcs: one for if the company leases with everything including BIK, maintenance, insurance, and tax relief factored in; and the other for if the employee leases and charges back to the company @ 40p a mile.

Business Opportunity? Ummm I think I mean something along the lines of one-off answers to specific tax questions @ oh I dunno £50 a time; I mean, at the end of all this thread the buyer will be none the wiser because there will inevitably be the swings and roundabouts of some unanticipated extra cost or tax break to factor into the decision after the event. I've just been reading about a guy in another thread who's trying to decide whether to set up a company here or in Denmark - loads of snippets of advice, but nothing all-encompassing. See what I mean? He'll end up moving his business and maybe himself to Denmark based on the odd pearl or two of wisdom that he has randomly collected from the UKBF thread that is his oyster. Bet he'd pay £100 to have his question answered.

I know, I know, answering a question fully and definitively for £50 will not get you on the rich list; and yet we (collectively) continue to dispense advice via the painful piecemeal process and, pro-bono to boot.

I know all the reasons the OP might prefer not ask his accountant for advice on this matter: he might have to wait days just to run up a cricket score of a bill just to get an unclear answer. But I wonder how many UKBF members would be willing to pay £50 for a one-off solution.

Hey thanks for noticing my post - it seems to be ignored.

Like you idea but will leave it to others to take up - just so busy with good old CheapAccounting and the bit I do on here

Wild Goose · May 5, 2010

David Griffiths said:
£50? No thanks.

The OP posted a wide ranging question, with incomplete data, so it's not actually possible to answer it. By the time that you'd gathered the missing information, and done all the sums it wouldn't be worth it.

And yet David we (collectively) draw out the missing information and answer the questions for free.

David Griffiths said:
And bet your bottom dollar that in many cases the questioner would come back with a few what-ifs which they'd expect answered within the original £50. (That's not aimed at the actual OP in this thread by the way!)

Ahha I've read Ronald Whatsisface's "A Professional's Guide to Value Pricing" and what-ifs definitely constitute a "change-order". Ching! - that'll be a further £50 sir.

David Griffiths said:
As to the Denmark query, if he was prepared to pay he'd have to use a firm that was as familiar with Danish tax and law as with the UK's. A bit more than £100 I think

I know, I know, £100 would be a bit cheap for saving his bacon.

David Griffiths said:
Who would be allowed to answer these questions, by the way? There are plenty of people on UKBF who seem quite happy to jump in with their viewpoint when they clearly don't know what they are talking about. Again I'm not referring to this thread in particular, but the first answer given was in fact wrong.

lol it's a veritible Hyde Park Corner alright. But I guess I'm giving an airing to the idea that not everyone in the Forum wants the free off the cuff answers that are, as you rightly point out, frequently wide of the mark. There seem to be a number of people such as this OP who need more thoroughly researched and properly considered advice, and who presumably would be willing to pay for that. Examples include our chap thinking of setting up in Denmark, and another who is general manager of a firm with 20 employees who wants to switch from Sage.

Pricing aside, is the idea a peach or a rotten apple?

elaine@cheapaccounting · May 5, 2010

It is already done at taxcafe

http://www.taxcafe.co.uk/questions.html

Wild Goose · May 5, 2010

elainec100 said:
Hey thanks for noticing my post - it seems to be ignored.

Like you idea but will leave it to others to take up - just so busy with good old CheapAccounting and the bit I do on here

Who could fail to notice you, Elaine?

Maybe someone will pick up on the idea - it would make a great loss-leader

Zeno · May 5, 2010

I have thought about setting up a free tax clinic of sorts to help those caught within the self assement net and of limited means - pensioners, foster carers, etc deal with it (much like HMRC used to do when they had local offices).

The sticking point is always the red tape - liability, professional indemnity, practising certificates, money laundering & client identification etc.

David Griffiths · May 5, 2010

Wild Goose said:
And yet David we (collectively) draw out the missing information and answer the questions for free.

Do we? Nobody has bothered in this case. Not one response from the accountants on here.

David Griffiths · May 5, 2010

Zeno said:
I have thought about setting up a free tax clinic of sorts to help those caught within the self assement net and of limited means - pensioners, foster carers, etc deal with it (much like HMRC used to do when they had local offices).

The sticking point is always the red tape - liability, professional indemnity, practising certificates, money laundering & client identification etc.

Not to mention those who are not of limited means but just won't pay, or those who have been correctly assessed to tax but when you tell them that it's correct it's all YOUR fault, or those who simply want a rant.

Wild Goose · May 5, 2010

Hi Zeno,

The Taxcafe that Elaine pointed towards does not appear to worry about red tape issues, client identification etc.

But you've raised an interesting point - at what point should we identify and insure clients? When they sign an engagement letter? When we give them advice at a free clinic? When we dispense advice Hyde Park Corner style in UKBF?

Zeno · May 5, 2010

David Griffiths said:
Not to mention those who are not of limited means but just won't pay, or those who have been correctly assessed to tax but when you tell them that it's correct it's all YOUR fault, or those who simply want a rant.

That too of course but would not be aimed at those in business as such.

I am convinced of the need for it but at some level feel it is actually quite a disgrace that it should be up to a voluntary organisation to steer people through the system.

Wild Goose · May 5, 2010

David Griffiths said:
Do we? Nobody has bothered in this case. Not one response from the accountants on here.

Well there's something about this case, and for that matter the would-be Dane and the Sage-hating GM, that makes me think they each should have a budget that should allow them to dine out comfortably. It doesn't stack up that they're hanging around the bins at McDonalds looking for Freebies.

David Griffiths said:
Not to mention those who are not of limited means but just won't pay, or those who have been correctly assessed to tax but when you tell them that it's correct it's all YOUR fault, or those who simply want a rant.

Ahha that's why - they're won't pays, not can't pays. That's scuppered my £50 special! They'd rather have free scraps!!

Wild Goose · May 5, 2010

Zeno said:
That too of course but would not be aimed at those in business as such.

I am convinced of the need for it but at some level feel it is actually quite a disgrace that it should be up to a voluntary organisation to steer people through the system.

Would it work on a contingency basis - no rebate, no fee?

Like LawyersRUs: "Hey, tripped over your own two feet lately? We can get you the compensation you deserve..."

Ahem, pardon. Didn't mean to be trite. But taking a commission of rebates on a no-win no-fee basis might benefit those who need it, whilst weeding out David's freeloaders (try getting a won't pay to sign a document agreeing to pay you 20% of his rebate!).

Zeno · May 5, 2010

Wild Goose said:
Would it work on a contingency basis - no rebate, no fee?

Like LawyersRUs: "Hey, tripped over your own two feet lately? We can get you the compensation you deserve..."

Ahem, pardon. Didn't mean to be trite. But taking a commission of rebates on a no-win no-fee basis might benefit those who need it, whilst weeding out David's freeloaders (try getting a won't pay to sign a document agreeing to pay you 20% of his rebate!).

Think you are misunderstanding - it would be a free service by professional accountants on a voluntary basis (much like here in a way).

It would be aimed primarily at people who find themselves requiring tax returns but without the means to pay an accountant. Not really for people in business as such but perhaps people with failed businesses - I am sure you get the idea.

The benefit for the accountants involved (other than a warm fuzzy feeling for helping their fellow man) would be the networking afforded (not a great drawn I admit) but this in itself raises problems of association.

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