New car - most efficient way of purchasing

[chrisphoto]

Hi All,

I'm about to purchase a new car which will be primarily for business use but obviously also some personal.

The car will probably be new and I'm looking at around 25K with 5K down so a balance to finance of 20. Could anyone advise me on the most efficient way of purchasing - I'm a sole trader and VAT registered if this helps.

Many thanks,
Chris

 

[stugster]

There was a recent thread about Renting/Leasing a vehicle for a set time. The outcome of the benefits really depend on your needs and length of time required for the vehicle.

In my total personal opinion though, if you're going to buy a car, don't buy a new one. The depreciation - especially at the outset - is so great, you might as well chuck a few grand down the gutter.

But, just my opinion Chris! I'm sure there will be many others!

 

[Cred-X]

I would agree with Stu.
Personally I would go for a low mileage car still under warranty and then charge the business for the mileage so it saves you getting stung for tax on the P11D

 

[stugster]

(P11D is your taxable expenses or benefits forms for employees.)

I know you probably know, but just for anyone else reading this thread, saves them looking it up if they don't

 

agree with the above posts a 2 year old low milage car is just run in and any faults have been fixed cost less than 50% of new,and if you buy a diesel much more poke than a petrol and fish and chips money to run.

Earl

 

[Brookman]

Hello Guys,

Why are you guys talking about P11d's he's a sole trader it has no relevance. He's not an employee?

Buying any car new or old your will be able to claim capital allowances limited to £3000 and you will also be able to claim tax relief on the interest element of your finance repayments.

Brookman

 

[frauke]

If you are going to buy with a loan - make sure it is HP, not a standard bank Loan.

With HP, the interest & other costs are fixed when you take out the loan and ALL the costs can be claimed by a sole trader as a business expense in the first year. (The reason for this is if you pay off the loan early you still have to pay these costs, as the settlement figure is based on the balance left to pay from loan including these costs - Loan balance in your accounts when you borrow the money is - e.g. £20K loan, Interest & other costs £5K payable over 4 years - Amount owed in the accounts = £25K which is reduced then with the repayments)

If you take out a standard loan you can only claim the costs & interest when they are added to the loan, which happens over the life of the loan rather than upfront (as with HP).

Forget the VAT - any personal use - you can't claim any of it, and unless your petrol spend is huge - it can cost more in VAT than you can reclaim.

A car that is expensive to run and buy, with low business mileage - car should be purchased for the business. Cheap car, cheap to run, high business mileage just claim the mileage allowance - less paperwork & can be more "profitable" and the HMRC are happy, especially if you keep good logs of your business journeys!

 

[Adam H]

So if I bought a car for business commuting, I don't claim on the VAT that's paid on the car, just the mileage? If so, how do I do that? Just trying to get my head around it!

 

[frauke]

Reclaiming VAT on car fuel is complicated. It has been a while since I have done some of this - so if I am wrong, would someone please correct me!

If you reclaim the actual cost of the VAT from the Petrol receipt (on a vehicle with any private use) then there are fixed scale charges (published by HMRC) which are the amount they have deemed as "sold by your business to you to cover the private use of the fuel" and these are added to your sales turnover for VAT purposes.

If you claim the mileage rates then you may claim the VAT element on the mileage rate (I think currently 11p on every 40p claimed) on the business mileage. You have to submit a formal expense claim, usually in the form of a travel log - and you also have to supply proof that you normally pay VAT on your fuel, by including a fuel receipt.

 

[frauke]

"Business commuting" - I hope that is not home to office - as that is not a business expense.

 

[chrisphoto]

Thank you everyone for replys and the phone calls, much appreciated.

Sadly the car is a new model with very few used around.

Cheers
Chris