Balancing out BIK in partnership

[Russinating]

Also asking our accountant this but he's more of a what I'd say a 'standard' accountant. Basically I'm looking to take advantage of the 0% BIK on EVs by contract purchasing a car throught the business. There's loads of benefits, including the 100% FYA to reduce our corporation tax and not impacting my take home/expendable income.

However we've always kept things balanced in the business, so ideally my business partner is given the same value of benefit. If we were to increase his salary it'd only be fair if his take home was the same as the benefit, and so what with the increase in tax, NI, PAYE etc the benefits of me buying it through the company reduce significantly.

I struggled to find any information as to business partners transfering money as gifts between personal accounts. The income has been taxed already and I'm aware of the £3k IHT pa but that's about all I could find. Would it be classed as income if I just gifted him money? Both of us have joint accounts with our partners so it's essentially my OH giving it to his as well but I'm sure HMRC would be more interested in it going between the 2 of us.

Welcome any thoughts or solutions.

 

[booyaka]

Initial thoughts are it could get messy with personal payments - for arguments sake - what happens if you miss one or two payments ?? Your business partner then raises a claim against you. Just playing devils advocate.

I would suggest where possible to keep it business related and avoid personal payments totally. What about at the end of the business year, the business makes a pension payment to him equal to the benefits you are receiving?? Just a thought.

Can you not buy 2 EV's so that you both have the benefit of EV car's that way neutralising the effects/issues?

 

[Maccapacca]

I have friends that are in the same situation, they lease the same cars each time, saves a whole load of grief.

 

[Russinating]

Initial thoughts are it could get messy with personal payments - for arguments sake - what happens if you miss one or two payments ?? Your business partner then raises a claim against you. Just playing devils advocate.

I would suggest where possible to keep it business related and avoid personal payments totally. What about at the end of the business year, the business makes a pension payment to him equal to the benefits you are receiving?? Just a thought.

Can you not buy 2 EV's so that you both have the benefit of EV car's that way neutralising the effects/issues?

He's literally just got a brand new car. In hindsight maybe he'd have looked at an EV but the reasons for/against are totally personal and unrelated to the business etc so maye have not wanted/been able to get one anyway. He's got a kid for example, I don't, he shares his car, I don't, etc etc.

The pension option is the easiest but I know he'd rather the money (or reduction of costs elsewhere). Having looked and been advised I don't believe there's any way of the business paying for his childcare now is there?

On the personal front I was just planning on gifting him the whole difference upfront since I'll be selling my current car. Aside from hypothetical issues like missed payments, arguments, selling the business etc, are there any tax/legal implications with directors gifting each other cash?

 

[Pudney]

On the personal front I was just planning on gifting him the whole difference upfront since I'll be selling my current car. Aside from hypothetical issues like missed payments, arguments, selling the business etc, are there any tax/legal implications with directors gifting each other cash?

At the simplest level gifts aren't taxable on the person receiving. The donor may well have to consider tax implications (e.g. if it's an asset), but in this case you're talking about cash so you only really need to worry about the IHT which you're aware of.

The real tax issue is that this isn't really a gift. It's a transfer of cash as a result of the other director's position as office holder. Theoretically that would make it taxable income for him.

 

[dowie]

However we've always kept things balanced in the business, so ideally my business partner is given the same value of benefit. If we were to increase his salary it'd only be fair if his take home was the same as the benefit, and so what with the increase in tax, NI, PAYE etc the benefits of me buying it through the company reduce significantly.

Not a comment on the tax issue itself but just on this point - I'd say that is unfair on you tbh... surely the important thing is that you both have the choice to take the car or take the same amount as salary... that they then have to pay tax on the salary and get an overall lower net benefit (nothing to do with the amount the company/business is allowing them) then that is down to their personal choice/the tax man.

For example if one of you chose to contribute more to your pension scheme (and get the tax benefits of that) you'd presumably not expect the other person to get a salary increase so their net benefit after tax was the same.

 

[Russinating]

Not a comment on the tax issue itself but just on this point - I'd say that is unfair on you tbh... surely the important thing is that you both have the choice to take the car or take the same amount as salary... that they then have to pay tax on the salary and get an overall lower net benefit (nothing to do with the amount the company/business is allowing them) then that is down to their personal choice/the tax man.

For example if one of you chose to contribute more to your pension scheme (and get the tax benefits of that) you'd presumably not expect the other person to get a salary increase so their net benefit after tax was the same.

Only problem is if it was the other way round I wouldn't want the extra salary since it's horribly tax inefficient and I don't *need* it. Even from my side as-is it's not a good use of the company's funds.