Company car tax?

[Gucci]

I am toying with the idea of providing myself with a Company car and am having difficulty working out the benefit in kind on the vehicle & fuel.
Don't want to bother my accountant at this stage if it's going to be a financial no no.

Can anyone who has a Company vehicle help clarify the situation for me?

The car would be for myself only and I am the sole director of a Ltd Company.

I currenltly have no other benefits in kind and my gross salary is £35k (lower rate tax payer)

Business mileage in 1 year would amount to no more than 2,500

Private mileage in 1 year would amount to no more than 14,000

I would like the Company to pay for both private and business fuel.

The cars i'm toying with are Porsche 911 C4S or C2 and BMW M3 SMG (e46).

The reason i'm looking into this is that we are moving home at the moment and need every penny. I currenly run a privately owned and paid for Seat Leon Cupra R which I could sell for 14k-15k. At the moment I reimburse any business miles travelled each month at the government stipulated pence rate per mile.

Obviously it's a case of weighing up the personnal tax increase against the benefit of (a) the car and (b) the free fuel/insurance/servicing/consumables etc.

Anyone care to help?

Thanks.

[Eric Mc]

Don't bother.

[thepeoplespal]

The benefit in kind is based around emissions these days and the cars you are looking at have high emissions and thus high taxes.

If you were going to run a Euro 4 compliant diesel car with a relatively low list price you might be okay, but paying 35% of say a £50k list price is going to land you with a £17,500 tax liability and a tax bill of £7,000.

Food for thought. The UK tax regime has made the introduction of big diesel cars inevitable.

[davidd]

Eric

I'm doing between 15 and 24k per year business miles at the moment (well for the last few months I have been racking up 2k per month). I'm taking 40ppm at the moment but this is a bleedin cerbera so it is costing me cash. I would like to justify some sort of car allowance or something so I can run a sensible oil burner. Any bright ideas?

Thanks

D

[thub]

The sums are pretty straightforward.

Purchase price x CO2 adjuster = amount to be taxed on for the car
CO2 adjuster x fuel adjuster = tax for fully expensed fuel

www.inlandrevenue.gov.uk
www.vcacarfueldata.org.uk

Example
911 (996) Carrera coupe 269g/km gives 35% CO2 adjuster
Purchase price £55,000 (New) (complete guess)
Fuel adjuster (03/04) £14,400
So you would be liable for the tax on (55,000 + 14,400) x 35%. i.e. £24,290
This can be reduced by personal contributions.

Certainly a more difficult choice for bigger cars.

>> Edited by thub on Wednesday 25th August 15:23

[Eric Mc]

And its not "Purchase Price" that is used - but "List Price". List Price may be higher than what you actually paid for the car. List Price should also be increased by the List Price of any accessories or extras added at the time the car was purchased.

There are no reductions for business miles either.

[simpo two]

It's all quite nonsensical isn't it? My 730 might have had a list price of £36K when new in 1993; now it's worth about £2K.
I'm a sole trader so my angle is 'private car used for business'. 75% of all my motoring costs are put through the books: the more I spend, the more save, as they say. I don't have to worry about CO2 emissions or list price either.

I think!

[Eric Mc]

As long as you can justify 75% business use and have the backup evidence to show how you arrived at that business/private useage split, you're in the clear.

[davidd]

But my cerbera is a private car used for at least 60%business and I only claim pence per mile, is there a better way?

D

>> Edited by davidd on Wednesday 25th August 16:19

[Eric Mc]

davidd - what is your current position?

Employee?
Director of a limited company?
Sole trader?

[davidd]

Eric

I'm a director (and 50% shareholder) of a private Ltd company.

D

[Eric Mc]

Obviously you have chosen the pence per mile basis of claiming motoring costs rather than the company car route. It is often now the best option. However, don't forget that the 40p per mile rate reduces to 25p per mile once the mileage goes over 10,000 in the year. If you continue to pay 40p per mile, you will suffer a benefit in kind tax charge on the additional 15p for all the miles claimed over the 10,000 mile marker.

You can claim an additional 5p per mile for every passenger carried on a business trip.

Also, the business can claim back VAT on the 40p per mile and 25p per mile costs (reduced by 50%) even though you will not have any VAT petrol vouchers in respect of this expenditure.

The 60% business useage of the car would have no bearing whatsoever on the actual business element that the company could claim if the car was owned by the company (totally unlike the situation when dealing with a sole trader).

If the company owned the car it could -
claim capital allowances on the car
claim the running costs of the car as a business cost
claim back the VAT on the running costs (where appropriate)

This would all help reduce the company's profit and (perhaps) its Corporation Tax liability

The downside is that the director would have to pay additional PAYE and Employer's Natioanl Insurance on his salary because of the Benefit in Kind arising on the use of the company car and the fact that the company was buying all the fuel.

[davidd]

Eric

Thanks, did not know about the passenger bit (there is always at least one) nor the VAT.

D

[Eric Mc]

To be truthful, the VAT claim is more a "general practice" point than a firm rule. I know a number of businesses who do this and so far the UK VAT authorities have not ruled the practice out of order. However, a VAT case in the Netherlands a year or so ago stopped a business from doing this. Whether this court decision will be extended to the UK is not known at present. I think you would be OK to make these claims at the moment.

[groomi]

[quote=Eric Mc]
You can claim an additional 5p per mile for every passenger carried on a business trip.
[quote]

Didn't know about that one!

I presume that the passenger has to be involved in the business activity for which teh travelling is necessary?

For example, on one of my current contracts I am giving my company secretary (girlfriend) a lift to her regular place of work which is near to my client... Could I claim the extra 5p?

Cheers,

Iain

>> Edited by groomi on Thursday 26th August 12:29

[Eric Mc]

No - the passenger has to be involved in business activity for your business AND the journey has to be a specific business journey, not the regular "commute".

[groomi]

Oh well, was worth a try.

Cheers Eric.

[simpo two]

One disadvantge of my way is that I rarely burn sufficient fuel in a quarter to get my VAT on fuel back (fuel scale allowance) - so although I keep all the receipts and log the VAT, its usually gets thrown out by the bookeeper. Arse.

[Eric Mc]

I hope he/she doesn't literally throw your petrol vouchers out. You may not claim the VAT back on them but you should be retaining them for accounts and tax purposes.

>> Edited by Eric Mc on Thursday 26th August 15:22

[Davel]

Could you not pay yourself a dividend, to fund the purchase of the car and then claim the mileage allowance to run it?

You will have a tax bill on the dividend but it may be an option to get the car you like.

It's totally wrong to tax part of the calculation of the list price of a car, like a 911. It would be much fairer on the price that you pay for it at the time.