Company Car

[NNS]

I wonder whether anybody can help me. I hate to start with a question, but I do intend to stick around and contribute to the forum.

I have a full time PAYE job. It is with a big corporate, I have zero options with regards to varying my salary through salary sacrifice options etc. I also have a small Ltd co business where I am the sole director and shareholder. This was started up at the beginning of the year. It is only likely to be a micro business- the aim of it was to generate enough for a tax efficient electric car and the rest into a pension, and potentially provide an option for early semi retirement in a few years. I haven't taken a salary, and probably do not intend to because it would cost me 40% in tax (hence anything spare going into pension).

I find myself needing to change car and although it is sooner than I planned, I think that I will go electric. It will be used for the business and privately. I don't have the cash personally or through the business for an outright purchase, but there are lease or pcp options available for myself and for the business. I have an existing car (owned personally) which I will sell. It will generate either a downpayment on pcp or the up front lease costs.

I am confident that the business can afford the monthly payments but the business has no credit history, no accounts (I use Freeagent to reconcile everything but haven't had a year end yet). I am ok with providing a personal guarantee and my personal credit rating is good. I am leaning towards a pcp purchase, just in case I need to sell. It feels easier to do this and limit my exposure than have to see out the remainder of a lease.

The cost of pcp appears to be cheaper to me personally than to the business.

Is there any issues with me taking out the pcp personally, but the business paying for it, either directly or through reimbursing expenses? I know that I will need to complete a tax return to account for the personal benefit and pay NI contributions on something, but I don't know whether there are rules on cars which say that the invoice must be made out to the business.
I presume that I lend the business the deposit as a capital injection.

I must stress that I am not trying to fiddle anything, I want to make sure that what I do is not going to cause HMRC to have a heart attack. I don't want to buy the car out of money that I have already paid 40% tax on if there is a legitimate way around it (which I understand that there is) and I can pay 2% tax on the BIK.

Thanks
Mark

 

[UK Contractor Accountant]

Is there any issues with me taking out the pcp personally, but the business paying for it, either directly or through reimbursing

Yes treated as company settling a pecuniary liability of the Director - subject to tax & NI

 

[NNS]

Yes treated as company settling a pecuniary liability of the Director - subject to tax & NI

Thank you. I presume that is tax and NI at the full rate?

 

[DWS]

If on a PCP then the it would not be a Company car, you may be better off charging the Company mileage for business use

 

[NNS]

I probably need to go and see an accountant and get them to go through the options with me. I can understand book keeping and strategic financing options, but the middle ground of technical accounting is new to me, and I know that there are lots of rules!

I want to gain the tax advantage of a company car- I don't do enough business mileage to make it worth buying the car personally and charge the company for business miles. Part of what I want to achieve is to reduce the corporation tax liability of the company (unlikely to be applicable in yr 1 because of startup costs) and to benefit myself to the greatest extent legally possible instead of taking it as salary or dividends and paying the tax associated with those.

If PCP isn't an option, a lease is presumably an option?

 

[UK Contractor Accountant]

Thank you. I presume that is tax and NI at the full rate?

of course plus company NI

tax - via P11D
NI - via Payroll scheme submissions