Company Car Leasing As A Business Expense ?

[ianrobo]

As a new contractor (to start in 4 weeks) this forum has been great to help with many questions. My big one is on my car.

I currently have a personal lease on a car which is over 130g/km and lease costs 350 a month.

I would like to move this to my business expense but it seems from this page this may not be the best idea.

I intend to pay myself a small salary and thus understand the BIK charge on this, though the vast majority of my motoring is for business.

It looks like I will be doing around 14K business Miles a year so at 45p this is nearly double the expense of the actual lease. In this case am I right in thinking the most cost efficient way is simply claim the expenses ?

 

[john1989]

45p per mile is only up to 10,000 and it is 25p per mile thereafter.

The mileage rate also includes fuel, repairs etc too. Not just the leasing costs.

It is probably best to keep the car outside of the business but you should run this past your accountant.

 

[ianrobo]

Thanks John, I am trying to do it myself to be honest. Though reading through it is becoming apparent to pay an accountant could save me the money I would pay otherwise !

 

[David Griffiths]

If you are operating through a limited company (and most contractors have to), there would be a personal tax charge on the benefit of having a company vehicle.

Also the lease couldn't be treated as a company expense if it is in your name, even if the company pays the monthly rentals. You'd have to get the lease company to transfer the agreement to the company name and most won't do it.

In that case you are stuck with the 45/25p claim, although there are moves afoot to restrict travel claims for contractors

 

[ianrobo]

Well one good thing is my contract company are willing to transfer over to a business lease. I already have the company set up as a LTD and most things clear in my head. Just the car one is the issue. Can not really work out which is better, if the car is from the company, I will have a charge, that's fine, do I get the petrol on the company (most will be for business) and claim back VAT ?

 

[David Griffiths]

You just have to do the calculations. If you pay for all fuel through the company and claim VAT, you will have to pay back some (or all) of it through a quarterly scale charge

If the company pays for all fuel including private, then there is an additional tax charge for the fuel. No substitute for doing the sums but in most cases it simply isn't worth having the company pay for your fuel

 

[ianrobo]

Thanks David, worked out some basic sums and confused at the different charges. Think I will engage an accountant to help me with this.

 

[Jon Neale]

I queried this with my accountant a few months back. Having the car leased through the company is not particularly efficient. However, if you can get away with a commercial vehicle that may work out better as they are not subject to the same restrictions but this depends on what you actually do.

The BIK that you get hit with is quite high plus additional tax costs.

I'm not an accountant and these are just my opinions.

Jon

 

[ianrobo]

OK thanks Jon, it is a minefield after reading some more. I have read the govt have some plans to restrict expenses for cars, does anyone have any more information or is it just consultation and no changes will happen until April 2017

 

[john1989]

Please provide the link to the changes you refer to.

 

[ianrobo]

I can not get a link now but it was on the Contracting UK website and a poster on there mention that in the last budget this was mentioned. Was he wrong ? Can I plan for at least 2 years if claiming expenses on the current rates ?

 

[Jon Neale]

What do you do? Can it be a commercial vehicle?

 

[john1989]

The proposals are to restrict relief on travel expenses restricted to umbrella company employees and limited company (PSC) employees who are under the supervision, direction and control of the end-user.

At this stage, they are just proposals.

@UK Contractor Accountant will probably be able to shed more light on this than I.

 

[UK Contractor Accountant]

Employment Intermediaries and Tax Relief for Travel and Subsistence Consultation document Publication date: 8 July 2015
Closing date for comments:30 September 2015

https://www.gov.uk/government/uploa...l_and_Subsistence_-_Consultation_Document.pdf