Leasing

Hatter The Mad · 11 Jan 2009 at 23:39

Hi,

I'm deciding whether or not to buy a car second-hand (£8-12k) or to lease.

If I leased the car, I could justify putting it down as a business expense (I am self-employed), thereby claiming back VAT (15%) and technically receiving a 30% 'discount' on it because I won't have £leasecost income taxed.

I would not be able to write down the cost of a second-hand purchase as a business expense.

To add to the decision, I owe the student loan company around £8k, which could pose (in the grand scheme of my finances) as a really cheap car loan.

With this in mind, does leasing a car become a sensible option for me?

Thanks

[TW]Fox · 11 Jan 2009 at 23:41

You can only claim half the vat back if its used for personal use as well, and you've got to be VAT registered in order to do so.

Car leasing is rarely sensible for an individual.

OllyM · 11 Jan 2009 at 23:44

And you'll have to pay company car tax on it.

Hatter The Mad · 11 Jan 2009 at 23:44

OllyM said:
And you'll have to pay company car tax on it.

Even if I am a sole-trader?

[TW]Fox · 11 Jan 2009 at 23:45

Hatter The Mad said:
Even if I am a sole-trader?

If it's being run as a company vehicle, ie you are claiming back tax, then yes.

gareth.e · 11 Jan 2009 at 23:45

Personally I think it depends how ethical you feel when putting things down as business expenses

I wouldn't go for a lease car just because it is easier to justify as an expense.

edit: and why a sole trader? I don't think I would risk being less than an LLP or LTD

OllyM · 11 Jan 2009 at 23:47

Hatter The Mad said:
Even if I am a sole-trader?

Oh, possibly not in that case, although I'm not sure what the rules are - I think you are taxed in some form.

Hatter The Mad · 11 Jan 2009 at 23:49

[TW]Fox;13270238 said:
If it's being run as a company vehicle, ie you are claiming back tax, then yes.

That wasn't my understanding, but thanks for bringing it to light. If it is the case, I won't be leasing.

gareth.e said:
Personally I think it depends how ethical you feel when putting things down as business expenses

My ethics are flexible

edit: and why a sole trader? I don't think I would risk being less than an LLP or LTD

What do you mean risk? I'm an independent consultant, why would I want the fuss of forming a LTD :confused:

gareth.e · 11 Jan 2009 at 23:58

Hatter The Mad said:
My ethics are flexible

What do you mean risk? I'm an independent consultant, why would I want the fuss of forming a LTD

I would just be worried if someone sued/screwed me (for for something like incompetence) or things just went wrong and I ended up ****** with no monies and had to declare myself bankcrupt..

pull2808 · 12 Jan 2009 at 08:15

It's called public liability insurance!

And yes there would be some private addbacks on the vat and actual charges. As well as maybe some benefit in kind taxes.

So leasing would be more hassle!

[TW]Fox · 12 Jan 2009 at 08:16

Given your insurance on a Fiesta is £1,300 I guess you are what, 17-18?

Why would somebody hire a 18 year old contractor as a 'consultant'? Isn't the point in being a consultant that you trade on considerable experience, etc?

If you are in your 30's+ then fair enough but if thats the case dear god start shopping around for insurance

Hatter The Mad · 12 Jan 2009 at 09:09

[TW]Fox;13271295 said:
Given your insurance on a Fiesta is £1,300 I guess you are what, 17-18?

21, 22 in a few months. I wouldn't owe the student loan company money if I was 18, would I?

Why would somebody hire a 18 year old contractor as a 'consultant'? Isn't the point in being a consultant that you trade on considerable experience, etc?

Despite being irrelevant, I was also doing what I do when 18. I'm a manager of a software company (that has no UK presence) and an web designer/consultant in my spare time - therefore I lump the two together as 'consultant', working on a contract basis and remain a sole trader.

[TW]Fox · 12 Jan 2009 at 09:26

Hatter The Mad said:
21, 22 in a few months. I wouldn't owe the student loan company money if I was 18, would I?

Quite, your insurance quote threw me, damn you need to shop around

Hatter The Mad · 12 Jan 2009 at 09:31

[TW]Fox;13271462 said:
Quite, your insurance quote threw me, damn you need to shop around

Well, it was my first year driving and I live in high-risk postcode at the moment. The policy isn't too bad either - free breakdown cover, free insurance on any other non-two seater, < 3.5l engine and non-4x4.

rickchild · 12 Jan 2009 at 21:15

[TW]Fox;13271295 said:
Given your insurance on a Fiesta is £1,300 I guess you are what, 17-18?

Why would somebody hire a 18 year old contractor as a 'consultant'? Isn't the point in being a consultant that you trade on considerable experience, etc?

If you are in your 30's+ then fair enough but if thats the case dear god start shopping around for insurance

Not too far off with that, on a recent job I was at 25 easily the youngest contractor/consultant there.

Luckily I can get away with it due to some early grey hair

Guv · 12 Jan 2009 at 21:52

There is no company car tax if you're a sole trader.

As said, you can only claim 50% of the VAT back if the leased car is used privately as well.

All expenses relating to the car must be adjusted for private use. So if you spend £2,000 on car repairs and petrol etc and you use the car 50% business and 50% privately, you can only claim £1,000 as a business expense and not the full amount. Capital allowances get adjusted for private use as well. This is the same if it's owned or leased.