car lease, tax, expense?

[smohamm527]

Hi Guys,

I have recently become self employed sole trader.

Everyday i travel to different locations as part of my job.

With regards to tax, if i obtained a car on contract hire, can i write a part of that as an expense?

Thanks

Sak

 

[smohamm527]

also please keep it simple as i find all the tax stuff confusing.

which is better?

1) contract hire which is £400 Per month 24 month contract

2) or own vechicle and just claim expenses, mileage etc

 

[Zeno]

OK, first of all the method of financing your vehicle should not be a tax decision in the same way that you should not buy a car for the tax benefits. You should buy whatever vehicle best suits your purpose by the most efficient means available to you (with the tax advantages/disadvantages of each forming only part of your decision).

You have not provided enough detail for any kind of meaningful answer. You would have to let us know:-

1. The make, model, cost & CO2 values for the vehicle
2. Your estimated business & personal mileage

Even then, there are still other considerations. Do you want another HP agreement hanging over your head? After two years of contract hire, you have no vehicle left as a deposit etc.

 

[AVC]

The advantages of business contract hire are numerous compared to buying a car.

The government has moved the goalposts on taxing by taking into account emisssions, there ore this should be a priority for you in chosing a vehicle.

Instead of losing money with depreciation of a vehicle and NEVER getting that money back. Business Contract Hire provides an alternative that doesn't just sit on your books as a depreciating asset. It shows as a rental and helps with off blanavce sheet funding. Yiou can claim back the VAT on the rental too and after the term is complete, simply start again with a new car. A new company vehicle helps to pormote a healthy organisation and when it comes to renewing you don't have to sell before you start again with ANOTHER deposit.

There are many avenues to consider including finanace lease or lease purchase, but business contract hire is the often overlooked and more beneficual alternative.

Happy to elaborate and help as necessary.

 

[Wowee]

Hmm, AVC's opinion isn't exactly unbiased.

My main argument against leasing is that you are tied into the contract, regardless of what happens to your business.

I have seen more than one newly self-employed person sign a 3 or 4 year lease, find that business doesn't go as they expected, and they are stuck with payments they can't afford, or a large payment to end the lease early.

Regardless of tax implications, if you are just starting out, and you already own a car, I'd stick with it for a while. Keep a very detailed note of your mileages (have a notebook in the car, list every business journey). Once you know how business is going, and you know what percentage of your car use is business, you can think about what to do about renewing the car.

 

[David Griffiths]

The advantages of business contract hire are numerous compared to buying a car.

/quote]


A statement frequently made by car salesmen and leasing company employees, and frequently disagreed with by accountants.

 

The average new car purchased in the UK will depreciate by 50% over the period of 2 years.

So your 20k beauty will be worth 10k after 2 years.

So the benefits in leasing to someone who frequently changes there car are self evident.

Nearly Any car sold in the UK will be fit for purpose unless one needs to transport more than 4 people or move a large quantity of goods.

All cars are capable of the maximum speed limit of 70 mph and there is no benefit in journey times in the UK by having a large powerful car except that you will arrive at the next jam quicker.

And will have considerably less wonga in your pocket.

Earl

 

[David Griffiths]

The average new car purchased in the UK will depreciate by 50% over the period of 2 years.

So your 20k beauty will be worth 10k after 2 years.

So the benefits in leasing to someone who frequently changes there car are self evident.

Earl

And you think that this 50% depreciation isn't factored into the leasing rate?

 

And you think that this 50% depreciation isn't factored into the leasing rate?

of course but as a leasing agent can get a much better deal off the manufactures the saving is considerable.

3 year deal on a 20k volkswagen scirocco will cost £8,640.

Earl

 

[spencergate]

But the depreciation argument loses some validity if you consider buying a car that ISN'T brand new.

Personally, I'd go for a 1 year old car anyway. Someone else has taken the major depreciation hit, I've never bought a NEW new car in my life.

 

But the depreciation argument loses some validity if you consider buying a car that ISN'T brand new.

Personally, I'd go for a 1 year old car anyway. Someone else has taken the major depreciation hit, I've never bought a NEW new car in my life.

For car purchase a 2 year old low mileage model has always been the most cost effective car to purchase.

secondhand prices are starting to rise quit significantly owing to the recession and this ridiculous car scrapping scheme.

Earl

 

[smohamm527]

thanks for all the advice guys,

i think im going to stick with the car ive got at the moment and keep a record of the business mileage.

thanks again

 

[AVC]

The advantages of business contract hire are numerous compared to buying a car.

/quote]


A statement frequently made by car salesmen and leasing company employees, and frequently disagreed with by accountants.

Disagreed with by accountants that don't fully understand or keep up with legislation enough to actually advise thier customers as such.

You are only paying for depreciation with a leased vehicle. Of course this is factored into the rental. Prices are based on the residual value. In terms of company cars, why pay a big deposit on a new vehicle, lose money driving it away and again when you decide to change it? It not only promotes a good image for your company but provides a sense of pride with drivers too. Yes of course I'm biased, but think about it!

 

[David Griffiths]

Disagreed with by accountants that don't fully understand or keep up with legislation enough to actually advise thier customers as such.

I see. The old "If you don't agree with me, you don't know what you are talking about" approach.

 

[spencergate]

thanks for all the advice guys,

i think im going to stick with the car ive got at the moment and keep a record of the business mileage.

thanks again

You Know it makes sense Rodders ..

 

[AVC]

I see. The old "If you don't agree with me, you don't know what you are talking about" approach.

Absolutely not. Simply taken in the correct context, it would indicate that some industry professionals are geuninely not able to advise on company car legilsation to thier customers. Perhaps not a specialist angle for them. We tackle this issue frequently and recommend many accountancy firms in a variety of regions across the country to our customers that do know what they are talking about in relation to these matters. It is a key area of business not only for companies with sizable fleets but equally for the individual or sole trader.

 

[NWPW]

What are the tax implications though?

At the minute I pay myself basic wage and take dividends every 1/4.

If I change to a company car does my personal allowance change.

I am looking at a Vauxhall Astra Environment Band F and CO2 149g k/m

I know on a business lease I can claim the VAT back but not sure how it changes my personal allowance.

Paul.

 

[elaine@cheapaccounting]

check out tax on company cars - that will tell you how it changes