Limited Company - Company Cars (Buying/business lease)

Soldato
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Hey Motors,

Just a bit of advice needed, I have set up my own limited company (to provide consultancy work to a client) and was looking at benefits I could possibley have from the company.

Medical, dental, etc etc.

But what I need help understanding (and before I pay an accountant to tell me the same) is how will the benefit in kind tax work on buying a car for the company or setting up a business lease for a car and just accept it as an overhead.

Cheers for any help,

KaHn
 
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No as its based on the P11d of the vehicle.

The only difference would be increasing the expenditure which in turn reduces the dividends you can take and the decides which tax threshold you sit in (20% or 40%) although im not sure how that is worked out as its a self assessment for end of year rather than PAYE.
 
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Ah ok, so irregardless of if I own the car or not I will still pay the same BIK based on the car I choose.

That makes sense now, cheers.

The dividends side of it I will speak to the accountant about it when I meet him in a week or so.

If anyone else has some more info that would be great.

Cheers,

KaHn
 
Soldato
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Ah ok, so irregardless of if I own the car or not I will still pay the same BIK based on the car I choose.

If you own the car you don't pay BIK..... but you can claim 45p a mile for 10k and then 20p..... which is why most limited co. directors in a 'consulting' role tend to go for the personal car but used for business model.

I assume when you say you own, you mean't your business owns. They are two very different things.
 
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Yes sorry, I am talking about the company owning it not my self. May just look at taking dividends out to pay for the car in full.

Just trying to figure out which is more tax efficient, will bring it up with the accountant :)

KaHn
 
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Do you have a car currently? If so just use that and claim the mileage. That is the most tax efficient way as you don't have to pay out a large sum to buy/rent a car :p
 
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Do you have a car currently? If so just use that and claim the mileage. That is the most tax efficient way as you don't have to pay out a large sum to buy/rent a car :p

Yeah I have a car but I have been looking at new ones anyway (personal) but as I am just moving to a ltd company I thought I would explore other options.

KaHn
 
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You can also claim an enhanced writing down allowance for lower co2 cars.

Practically this means if you want something like a 320d Efficient Dynamics the company route is best but anything more than that and you are better to buy personally and expense at HMRC rates, but its best to sit and do the maths.
 
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[TW]Fox;23173099 said:
You can also claim an enhanced writing down allowance for lower co2 cars.

Practically this means if you want something like a 320d Efficient Dynamics the company route is best but anything more than that and you are better to buy personally and expense at HMRC rates, but its best to sit and do the maths.

Ah ok, so its going to be a lot more complicated than I was thinking :(

Cheers Fox.

Will have to do some proper research now :)

KaHn
 
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Ah ok, so its going to be a lot more complicated than I was thinking :(

Cheers Fox.

Will have to do some proper research now :)

KaHn

If you're going to buy a car with emissions like the BMW and through the company do it before April 2013, the emission bands are being lowered then.
 
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Essentially if you get a car with under 110g/km of CO2 - which essentially means you buy either a rubbish car OR a BMW 320d EfficientDynamics (I'm not saying that the only non Rubbish cars in the universe are those too, just that it is the only normal car that have managed to get under here) before 1st April 2013 you can claim a 100% Writing down allowance in Year 1.

What this means is that you can offset the entire cost of the car against your companies profits for tax purposes. I'm sure you know what this means but lets imagine your company reports 100k profit which is then taxed at 24%. You'd pay £24k and end with net profit after tax of £76k.

But you buy a 320d ED for £28k. Your profit for tax purposes is now £72k. So you only pay £17k @ 24% saving £8k on tax.

This is a huge saving and makes buying the brand new car a no brainer, you effectively reduce its net cost to £20k which is a bargain for a brand new 3 Series.

This assumes you only use the car for business purposes. Which you probably don't, so its best case scenario. What actually happens is that you only get the WDA on the percentage the car is used for business in that tax year. So if you use it for 50% business, you get 50% of 100%.

Now of course it isn't THAT long to the end of the tax year by the time the car arrives so of course it is your choice how much you use it for personal usage in this tax year ;)

Don't forget you'll then be driving the car as a company car so you'll be liable for company car tax. If you are a 20% taxpayer (Which as a hard working director of his own limited company who obviously will not want to draw a massive salary I'm sure you will be...) this is £70 a month.

The savings are much lower though if you don't pay full corporation tax - ie you take under 300k a year of profits - as your tax rate is lower. If you pay that rate, I reckon the difference between buying it yourself and buying it through the company is much smaller (£5.6k saving using my example of 100k profit). The lower your profit the lower the saving and the less worth the bother it all becomes.
 
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Soldato
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Corp tax will be 20% and there's no real way of avoiding higher rate tax unless you have a second shareholder, dividends are included as part of your end of year assessment. SLC is included in that aswell... or simply don't take the money out of the business.

Problem with buying the car outright from day one is that I'm assuming the company doesn't have £28k in cash.

What's your annual mileage, 10k will dump £4500 of turnover back to you as an expense and not a profit subject to corp tax.
 
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[TW]Fox;23173795 said:
Essentially if you get a car with under 110g/km of CO2 - which essentially means you buy either a rubbish car OR a BMW 320d EfficientDynamics (I'm not saying that the only non Rubbish cars in the universe are those too, just that it is the only normal car that have managed to get under here) before 1st April 2013 you can claim a 100% Writing down allowance in Year 1.

What this means is that you can offset the entire cost of the car against your companies profits for tax purposes. I'm sure you know what this means but lets imagine your company reports 100k profit which is then taxed at 24%. You'd pay £24k and end with net profit after tax of £76k.

But you buy a 320d ED for £28k. Your profit for tax purposes is now £72k. So you only pay £17k @ 24% saving £8k on tax.

This is a huge saving and makes buying the brand new car a no brainer, you effectively reduce its net cost to £20k which is a bargain for a brand new 3 Series.

This assumes you only use the car for business purposes. Which you probably don't, so its best case scenario. What actually happens is that you only get the WDA on the percentage the car is used for business in that tax year. So if you use it for 50% business, you get 50% of 100%.

Now of course it isn't THAT long to the end of the tax year by the time the car arrives so of course it is your choice how much you use it for personal usage in this tax year ;)

Don't forget you'll then be driving the car as a company car so you'll be liable for company car tax. If you are a 20% taxpayer (Which as a hard working director of his own limited company who obviously will not want to draw a massive salary I'm sure you will be...) this is £70 a month.

The savings are much lower though if you don't pay full corporation tax - ie you take under 300k a year of profits - as your tax rate is lower. If you pay that rate, I reckon the difference between buying it yourself and buying it through the company is much smaller (£5.6k saving using my example of 100k profit). The lower your profit the lower the saving and the less worth the bother it all becomes.


Aww Fox, you were doing so well! This particular bit is wrong:

This assumes you only use the car for business purposes. Which you probably don't, so its best case scenario. What actually happens is that you only get the WDA on the percentage the car is used for business in that tax year. So if you use it for 50% business, you get 50% of 100%.


Now of course it isn't THAT long to the end of the tax year by the time the car arrives so of course it is your choice how much you use it for personal usage in this tax year ;)

That particular bit about personal usage is only applicable to sole traders or individual members of a partnership (i.e. not corporate members). Ltd companies don't have their allowances restricted due to personal usage.

Personal usage would mean a BIK would be applicable however.

You so want to be an accountant don't you :p
 
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[TW]Fox;23173795 said:
Essentially if you get a car with under 110g/km of CO2 - which essentially means you buy either a rubbish car OR a BMW 320d EfficientDynamics (I'm not saying that the only non Rubbish cars in the universe are those too, just that it is the only normal car that have managed to get under here)

Oi! Mine's 106g/km :p
 
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