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Read the thread, the car in this example is a brand new AMG Mercedes!A £20k BIK would probably mean you're driving around in a Zonda!
What kind of idiot gets a brand new car?
- Thread starter Del Lardo
- Start date
I have, but I should have been more specific. My comment was aimed generally at OcUK motors and the financial advise that can be found here. It's not a bad thing
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A £20k BIK would probably mean you're driving around in a Zonda!
Not even close.
I had a client who had a director with a Bentley Continental GT that cost £250k. The BIK on that was about £28k and from 6 April 2011 it'll be about £80k as they're removing the 80k cap on list price.
SPOT THE DELIBERATE MISTAKE IN THE TEXT BELOW! OOPS...
The BIK on, say, a Zonda Roadster costing £1.1M would be astronomical. The BIK is calculated as $value * (15% + X) where X is the CO2 emissions figure less 130, divided by 5 and rounded down. At present they cap the list price at £80k, but that's changing from 6 April 2011. I can't find figures on the Zonda's CO2 emissions but given that they use 6 and 7 litre engines, it's going to be pretty damn high. Taking an extremely broad brush estimate of 500g/km (approximately the level of a Gallardo, is that close enough?) you're looking at X being 74%. That's going to give a percentage of 89%.
Right now, the BIK on the Zonda would be about £70k.
From 6 April 2011, the BIK on the Zonda would be in the region of £980k and you'd pay about £450k of tax on it per year.
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This.
Not this.
Point is the 'accountant' who spends all day dealing with leases was totally wrong.
Imagine if you had paid for his 'knowledge'.
Soldato
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What is BIK? 
What is BIK?
Benefit in kind. It's the deemed cash value of a non-cash benefit. You then get taxed on that deemed amount.
Soldato
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Not really
If your company gives you the use of a car, then you are getting a car as a result of your being employed.
If you were only taxed on your cash income, then your employer could give you a car and you'd not be taxed on it.
What if you had a Zonda as a company car and only earned say £100k pa?
Is there some kind of limit to how negative your "K" code can be?
I can't think of a reason why there would be a limit, besides that it would make the calculations a bit of a faff if it got more negative than your actual earnings.
They'd more likely just not bother deducting it from your code and just tax it as a benefit rather than collecting it via your tax code.
Soldato
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Not really
If your company gives you the use of a car, then you are getting a car as a result of your being employed.
If you were only taxed on your cash income, then your employer could give you a car and you'd not be taxed on it.
Where's the problem in that? The employer will surely have or will be paying tax for it already, so why does the driver then have to pay tax for that also?
Just my view point.
Why would the company be paying tax on it? They'd be claiming a deduction for it if anything?
If you receive something as a result of your being employed, it's taxed as employment income. That's a fundamental tenet of the rules on what is taxed as employment income.
The only way it would work such that you wouldn't get taxed on it would be if the car was only for business use, but that is incredibly difficult to mandate and HMRC generally won't accept that as being the case.
Ok, the response I got was:
"If you are self employed there is no tax to pay on it, either co2 or otherwise. When you contract hire you set 100% of the payments off against tax if self employed. Nothing to do with co2 it is just classed as an operating lease, like a photocopier.
Basically it is the only perk of being self employed. But you have to be VAT registered so you can’t just set yourself up as self employed just to avoid car tax."
As right or wrong as that is, it's what the accountants have said...
"If you are self employed there is no tax to pay on it, either co2 or otherwise. When you contract hire you set 100% of the payments off against tax if self employed. Nothing to do with co2 it is just classed as an operating lease, like a photocopier.
Basically it is the only perk of being self employed. But you have to be VAT registered so you can’t just set yourself up as self employed just to avoid car tax."
As right or wrong as that is, it's what the accountants have said...
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Is he self employed or is he employed by his own company?
If he's self employed, then the payments are deductible from his business profits, but only to the extent that they represent business use of the car. Any costs attributable to private use will be non-deductible.
If he's employed, then the costs are deductible, and he'll pay an income tax charge on the BIK.
Great news. Just need to become VAT registered now
It's only good news if its right though! And these are many disadvantages of being vat registered, main one being you have to put your prices up by 17.5%, that or reduce your margin!