Purchasing a business / personal car

[Tigris]

Hi guys,

I'm about to buy a car which will be used for both business and personal use (will keep mileage records as I do now).

The main issue is the money to buy it is coming from multiple places. I have a personal loan which will be paid into my business account (sole trader with a business bank account) then paid on to the car dealer. I am using £3,000 of my own money rather than the business as well.

Am I best of paying that £3,000 into my business account then pay the dealer from there or just pay direct from my savings? My business to personal miles is probably around 80% personal and 20% business so I'm not sure much of it would be considered as a tax allowance anyway.

Not sure if to pay the £3000 direct from my personal bank to the car dealer and not go through the business as it will alter my business income/outgoings reports with not much of a tax allowance?

 

[JEREMY HAWKE]

Hi guys,

I'm about to buy a car which will be used for both business and personal use (will keep mileage records as I do now).

The main issue is the money to buy it is coming from multiple places. I have a personal loan which will be paid into my business account (sole trader with a business bank account) then paid on to the car dealer. I am using £3,000 of my own money rather than the business as well.

Am I best of paying that £3,000 into my business account then pay the dealer from there or just pay direct from my savings? My business to personal miles is probably around 80% personal and 20% business so I'm not sure much of it would be considered as a tax allowance anyway.

Not sure if to pay the £3000 direct from my personal bank to the car dealer and not go through the business as it will alter my business income/outgoings reports with not much of a tax allowance?

As a sole trader it is irrelevant as you will only pay tax on the profits you make regardless of what accounts you use to pay for expenses

 

[MyAccountantOnline]

.

Am I best of paying that £3,000 into my business account then pay the dealer from there ......

Yes I would to keep the records tidy and have a full record of the transactions.

Unless you are using the cash basis you claim capital allowances (with a deduction for private use) on the full cost of the car regardless of where the funds have come from.

Also don't overlook claiming tax relief on the interest charged on the loan adjusted for private use.

 

[Tigris]

Yes I would to keep the records tidy and have a full record of the transactions.

Unless you are using the cash basis you claim capital allowances (with a deduction for private use) on the full cost of the car regardless of where the funds have come from.

Also don't overlook claiming tax relief on the interest charged on the loan adjusted for private use.

Thank you.

It's a bit faffy to be honest. I have a relative paying a certain amount as well but they are paying the dealer direct (they no longer have a car so wanted to help with my new purchase).

I've got 3 different payments to cover the cost of the vehicle.

My savings, family member and personal loan (getting paid into my business account).

 

[MyAccountantOnline]

Thank you.

It's a bit faffy to be honest. I have a relative paying a certain amount as well but they are paying the dealer direct (they no longer have a car so wanted to help with my new purchase).

I've got 3 different payments to cover the cost of the vehicle.

My savings, family member and personal loan (getting paid into my business account).

Depending on what software you are using the payment from the relative is easy to include too. You use a journal entry to record that and assuming it's a gift you'll credit capital introduced and debit the cost of the car.

 

[Tigris]

I spoke to my accountant regarding this and they mentioned get the relative to pay their part direct then just take that from the cost of the total car. For example say the car is £20,000 and they pay £5,000 then just £15,000 is going through the quickbooks and the car is £15,000 as far as anyone is concerned?

 

[DWS]

Do you have to pay the relative back?
If so the car is still costing £20k

 

[Tigris]

Do you have to pay the relative back?
If so the car is still costing £20k

No, I don't. I'm currently using quickbooks online so I presume I need to use a journal record to record the family members payment towards the vehicle?

 

[DWS]

Would it not work out better keeping the car out of the business and claiming the mileage?

 

[Tigris]

Would it not work out better keeping the car out of the business and claiming the mileage?

I thought put it all through the business as I applied for a personal loan at 6.3% using my business bank account. What I did plan was to put a few thousand from my savings into my business bank account then pay that along with the personal loan money which is due to go into the business bank within the next few days.

I know there's 2 ways to claim vehicle expenses so i've been keeping a record on quickbooks of all my business and personal miles but my accountant hasn't actually said which method we are using or which would be best.

 

[MyAccountantOnline]

I spoke to my accountant regarding this and they mentioned get the relative to pay their part direct then just take that from the cost of the total car. For example say the car is £20,000 and they pay £5,000 then just £15,000 is going through the quickbooks and the car is £15,000 as far as anyone is concerned?

I would ask your accountant why?

The car cost £20,000.

If you show the cost incorrectly as £15,000 assuming you are claiming capital allowances on the cost you are loosing a claim on £5,000.

 

[Tigris]

Why would you want to do that?

The car cost £20,000.

If you show the cost incorrectly as £15,000 assuming you are claiming capital allowances on the cost you are loosing a claim on £5,000.

Didn't want to try and claim for £5,000 (for example) when it's gifted money essentially.

 

[MyAccountantOnline]

Didn't want to try and claim for £5,000 (for example) when it's gifted money essentially.

That doesn't mean you loose tax relief on what the money has been used for - the car has cost £20,000.

It's the same principle as using bank borrowings. If you funded the car with bank borrowings of £20,000 the car has still cost £20,000.

 

[Tigris]

That doesn't mean you loose tax relief on what the money has been used for - the car has cost £20,000.

It's the same principle as using bank borrowings. If you funded the car with bank borrowings of £20,000 the car has still cost £20,000.

Ok, I may get my relative who is paying a little to put it into my business bank then instead of direct to the dealer then it will all match up when I do the one large payment