Model 3 through Ltd company that subsequently folds.

[manracer]

Hypothetical question and nothing underhand...

say I buy a model 3 through my ltd company in order to get the corporation tax benefit, then say 6 months later i need to close down the company for good - what happens with the asset and the tax that I have saved.

Genuine question.

[springfan62]

Company would be liquidated, assets sold (including Model3), Corporation tax adjusted to reflect balancing charge on car.

It isn't a way to never repay the capital allowances if thats what your plan is.

[MOBB]

What about if the company continued to exist, but not trade?

Could the company continue to treat the car as an asset, incur running costs etc? I assume it would be deemed to be 100% private use, but with the 0% BIK would there be no issue?

[manracer]

springfan62 said:

Company would be liquidated, assets sold (including Model3), Corporation tax adjusted to reflect balancing charge on car.

It isn't a way to never repay the capital allowances if thats what your plan is.

thanks, no it wasnt the plan. its a case of i have a model 3 on rental, thinking about buying through business, but with the IR35 changes imminent, I just thought it was worth knowing what would happen, thats all.

[Guffy]

I've been pondering the same thing OP, my current contract is outside IR35, so was thinking about offloading the Amarok for an EV through my limited company, however my next gig could be inside IR35 this time next year.

I take it i could just purchased the EV from my business next year at the market trade-in rate?

MOBB said:

What about if the company continued to exist, but not trade?

Could the company continue to treat the car as an asset, incur running costs etc? I assume it would be deemed to be 100% private use, but with the 0% BIK would there be no issue?

Good question too!

Edited by Guffy on Tuesday 11th February 14:25

[johnnymiller]

I’m trying to navigate exactly this scenario.

Had my Tesla since summer last year, bought and paid for in full by my ltd co. I was expecting some turbulence with IR35 but I’ve ended up leaving my contract and going PAYE with a different company as of 3 weeks ago, so dont need the limited co anymore.

Accountant is telling me to close the company down, but as far as i can tell, all that does is realise a load of tax bills that i don’t need to incur right now. I’m not naive enough to think the deferred corporation tax of the 100% first year allowance gets lost in the wash. Got a call with them next week about it, as I don’t think they’ve factored that into their advice

As far as i can tell I’m better off just leaving the car in the company and paying the zero/1%/2% BIK for the next few years until i eventually sell it and then Just pay corporation tax on the “profit” from selling the car, which obviously will be at a depreciated value.

[DJP31]

johnnymiller said:

I’m trying to navigate exactly this scenario.

Had my Tesla since summer last year, bought and paid for in full by my ltd co. I was expecting some turbulence with IR35 but I’ve ended up leaving my contract and going PAYE with a different company as of 3 weeks ago, so dont need the limited co anymore.

Accountant is telling me to close the company down, but as far as i can tell, all that does is realise a load of tax bills that i don’t need to incur right now. I’m not naive enough to think the deferred corporation tax of the 100% first year allowance gets lost in the wash. Got a call with them next week about it, as I don’t think they’ve factored that into their advice

As far as i can tell I’m better off just leaving the car in the company and paying the zero/1%/2% BIK for the next few years until i eventually sell it and then Just pay corporation tax on the “profit” from selling the car, which obviously will be at a depreciated value.

First off I’m not an accountant, but unless you are still employed by your own ltd co I don’t see how they could provide you with a company car. Whether you could remain employed drawing no salary just to keep the car alive I don’t know.

It‘s an interesting scenario, and wouldn’t surprise me if there’s a requirement for the ltd co to keep trading to avoid being wound up or being classed as dormant.

Please let us know how the call goes.

[Caddyshack]

I think the car just remains an asset of the limited company and then when sold you just pay the tax on the depreciated value.

[lost in espace]

I looked into this and the only risk about keeping it and having a dormant ltd that I could see that company car tax goes up substantially and costs you.

[johnnymiller]

Well I’m the sole director/shareholder of the company, basically an IT contractor PSC. Car is assigned to me and I’m paying PAYE BIK at 16% through my tax code at the moment as i use the car privately anyway, although its zero for the tax year starting in April.

I think i can just leave the car where it is in the ltd co. and only pay corp tax when i sell it, although I’m unsure of the implications if my company doesnt do any trade and is dormant.

I want to ask my accountant if its feasible that I “hire” the car from my company (ie. pay money from my PAYE salary into my company as a hire) and then don’t pay BIK tax, my company isn’t dormant, and i pay the “hire” money into my pension from the company so i dont get hit with corp tax on what i pay into the company as “hire charges”.

The default approach of closing the company down seems to mean you pay the first year allowance charges back through corp tax and then when the company closes cash/assets transfer to me as a shareholder/director and are “taxed accordingly” which seemingly means the value of the car is treated as income, then if I’m closing the company can i use the entrepreneur relief scheme so its 10%. I dont know enough about this area to know how it is handled, I’ve asked them to show their workings on all this, or at least explain the principles at each step.

Edited by johnnymiller on Saturday 15th February 21:32

Edited by johnnymiller on Saturday 15th February 22:03

[johnnymiller]

DJP31 said:

First off I’m not an accountant, but unless you are still employed by your own ltd co I don’t see how they could provide you with a company car. Whether you could remain employed drawing no salary just to keep the car alive I don’t know.

It‘s an interesting scenario, and wouldn’t surprise me if there’s a requirement for the ltd co to keep trading to avoid being wound up or being classed as dormant.

Please let us know how the call goes.

Forgot about this thread, in short the value of the car becomes part of the “capital distribution” calculation when you MVL the company. So, add up the cash in the company (after taxation, closure costs and settlement of any debts) plus the value of any assets the company owns (including the NBV of the car), deduct any of your unused CGT allowance for the year from the total. and then pay tax at 10% of the remainder under entrepreneur relief.

[bigburd]

johnnymiller said:

I’m trying to navigate exactly this scenario.

Had my Tesla since summer last year, bought and paid for in full by my ltd co. I was expecting some turbulence with IR35 but I’ve ended up leaving my contract and going PAYE with a different company as of 3 weeks ago, so dont need the limited co anymore.

Accountant is telling me to close the company down, but as far as i can tell, all that does is realise a load of tax bills that i don’t need to incur right now. I’m not naive enough to think the deferred corporation tax of the 100% first year allowance gets lost in the wash. Got a call with them next week about it, as I don’t think they’ve factored that into their advice

As far as i can tell I’m better off just leaving the car in the company and paying the zero/1%/2% BIK for the next few years until i eventually sell it and then Just pay corporation tax on the “profit” from selling the car, which obviously will be at a depreciated value.

I am in the middle of buying through Ltd Co. My accountant (Intouch) indicated that if I went PAYE at any point then the company could be put into some kind of non-trading for 3mth periods. I have also setup a new Joint Venture with 3 colleagues to develop a consultancy (our PSC's are share holders and we are directors) Invoice from JV to end clients and then take money from JV to PSC as a dividend (alphabet) cannot be used as reduction of Corp tax in JV but inbound div to PSC does not class as taxable inside PSC

I am looking for best "company car" insurance for my Ltd Company..Also what home chargers people are running for Tesla M3L