buying my company car!

Discussion in 'Accounts & Finance' started by torsion, Mar 11, 2006.

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  1. torsion

    torsion UKBF Newcomer Free Member

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    Hi

    what are the legalities of purchasing my company car for £1.
    I am a director of a Limited company. the other director is my fiancee. There are only two of us in the company. Most of my milage is private, but i purchased the car on finance through the company 5 years ago, and obvoiusly pay the penalty in tax. The finance has now finished, and the company has owned the car for the last 6 months. I know that it will have depreciated over the 5 years, and it probably has a book value of about £4-5k. It originally cost £18k, do I have to pay to the company the book value of the car to purchase it or can i just pay say £1 for it.
    I will still be using it for business and it is insured for business by the company currently, although as I said of my 18000 miles per year only about 3000 are business.
    I currently pay my own fuel, but all other expenses are covered by the company.

    Any help would be much appreciated.
    thanks
     
    Posted: Mar 11, 2006 By: torsion Member since: Mar 11, 2006
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  2. Alpha

    Alpha UKBF Newcomer Full Member

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    you can purchase the company car from the business for £1 if you wish however.

    The difference between the market value and the value that you pay should go on your P11d as a benefit in kind,and therefore taxable.

    As far as the company treatment is concerned the car will have a tax written down value after 5 years.

    The difference between the tax written down value and what the company receives for it will be a taxable charge on the company at whatever rate the company pays tax.

    my guess is

    allowances

    year 1 3000
    year 2 3000
    year 3 3000
    year 4 2250
    year 5 1687 ? not sure if the car has featured in 4 or 5 years tax comps!!

    Cost £18k allowances taken £12937 (or £11250 if 4 years)

    So tax written down value is £5063 (£6750)

    CT charges therefore would be (assuming 19%) £961.97 (£1282.50)





    :)
     
    Posted: Mar 11, 2006 By: Alpha Member since: Feb 16, 2004
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  3. KM-Tiger

    KM-Tiger UKBF Legend Full Member - Verified Business

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    You need to discuss this with an accountant, but if you are going to change to claiming tax free mileage, <nudge>, <wink>, surely you must be doing more than 3,000 miles on business?
     
    Posted: Mar 11, 2006 By: KM-Tiger Member since: Aug 10, 2003
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  4. Alpha

    Alpha UKBF Newcomer Full Member

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    oh reckon he probably does at least 8670 business miles per year :D
     
    Posted: Mar 11, 2006 By: Alpha Member since: Feb 16, 2004
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  5. torsion

    torsion UKBF Newcomer Free Member

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    hi

    alan thanks for the breakdown, i really appreciate that.

    the only thing i claim from the company is 43p per business mile when i have to go to a meeting with a client, maybe once or twice a month. i only do a few business miles per year, because my business only works for a handful of companies and almost all of my work is desk based. my office is 2 miles from home.

    is there a significance to 8670 miles per year?

    i dont understand why it should go on the P11D, if we sold the car to a garage for say £3000 what would happen then? I assumed that since it was a company car the company could sell it as effectively a private sale, and if it made a loss on the deal 'so what'. im going to continue to use the car, and claim the same 43p per mile. Im not interested in buying it to sell and make a profit. i simply want to stop being taxed on it, and as i understand because its a diesel it is going to be worse this year.
     
    Posted: Mar 11, 2006 By: torsion Member since: Mar 11, 2006
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  6. gordonthegofor

    gordonthegofor UKBF Newcomer Free Member

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    If "almost all of my work is desk based. my office is 2 miles from home."
    Could you not work from home therefore claim a proportion of heating lighting coffee etc (be careful of claming a proportion of mortgage)

    It goes on the p11d because you are giving your self a benefit

    Gamble try putting the car into an auction and bidding for it, if you are lucky you buy it far under the book value and no P11D
     
    Posted: Mar 11, 2006 By: gordonthegofor Member since: Dec 20, 2005
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  7. gordonthegofor

    gordonthegofor UKBF Newcomer Free Member

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    you need to speak to an accountant, if you don't know one PM Alan who has already replied to you on this subject
     
    Posted: Mar 11, 2006 By: gordonthegofor Member since: Dec 20, 2005
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  8. Alpha

    Alpha UKBF Newcomer Full Member

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    None whatsoever aprt form the fact that you wouldn't claim exactly 10000 miles would you :)

    Also if you are claiming 43p per mile this is in excess of the recommended rates of 40p for the first 10000 miles and the difference again should appear on a P11d.

    Of course you do not have to sell the car for just £1 you can find out what the bottom book price is and pay that for the car.

    This will then change all the calculations previously given.


    If the car is sold for less than market value to an employee (and that includes all directors) then their is a benefit in kind arising out of employment and this must be reported on a P11d.
     
    Posted: Mar 13, 2006 By: Alpha Member since: Feb 16, 2004
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  9. Guest

    0 0
    Why are you selling the car to yourself - you're only causing yourself more tax.
    Sell it to a 'friend' for a £1 and then buy it back again!
     
    Posted: Feb 14, 2008 By: Member since: Jan 1, 1970
    #9
  10. citypad

    citypad UKBF Newcomer Free Member

    112 4
    my mother (director) has a company car that is owned by a company but is in her name, on this she pays tax on a yearly basis. could i buy it off her for £1? would there be no legalities or tax to pay? i thought you could only sell vehicles at the lowest book price.
     
    Posted: Feb 15, 2008 By: citypad Member since: Jan 15, 2008
    #10
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