Can my Ltd Co buy a car to sell and make a profit on?

[anonymous-user]

The title of this thread is a mess due to the limited space, but essentially: Can my Ltd Co buy and sell cars, even though this is absolutely nothing to do with the 'core business' of the Ltd Co.

My business is consultancy work, and I have a Ltd Co though which this is carried out.

Can my Ltd Co buy a classic or supercar of some sort (or a couple of cars) then advertise it for sale at a slightly increased price, and see if there are any takers?

Would it be best to buy the car in my personal name or the company name?

What would happen if the car was owned for a year then sold at a loss? Would this cause any red flags to HMRC?

Anything else I need to know?

Thanks

[chml]

Various different things would come into play - off the top of my head (and just whilst I'm waiting for a meeting to start):

BIK if using the vehicle(s) for personal use
Margin VAT scheme - if Standard VAT registered then this wouldn't apply but depending on the numbers involved then it might be better to start NewLtdCo.

What would happen if the car was owned for a year then sold at a loss? Would this cause any red flags to HMRC? - Nothing, this could be depreciation/just a loss but depends on where the money is coming into from the business to buy the car in the first place as to whether this is a director loan/asset of the business etc.


But in essence nothing to stop you doing it - a lot of LtdCos will buy a vehicle and then dispose of it regardless of their core business.


In short, speak to your accountant.

[jonamv8]

I think a one off here and there would be fine but if its ongoing then HMRC may have something to say.

I can't see an issue with buying, holding for 6 weeks and selling at a profit as long as any liabilities for tax are met. Holding for a long time will throw up some issue.

Speak to an accountant - ERIC MC ?

[anonymous-user]

chml said:

Various different things would come into play - off the top of my head (and just whilst I'm waiting for a meeting to start):

BIK if using the vehicle(s) for personal use
Margin VAT scheme - if Standard VAT registered then this wouldn't apply but depending on the numbers involved then it might be better to start NewLtdCo.


But in essence nothing to stop you doing it - a lot of LtdCos will buy a vehicle and then dispose of it regardless of their core business.

Thanks for the input.

You have answered another question I was going to ask with regards to personal use and BIK.

The reason I'm asking is, that a friend of mine bought a supercar with money that his Ltd Co had spare in the bank, and plans to have it up for sale, but essentially keep it for a year and enjoy it here and there, and if it sells, it sells.

If it depreciates or needs tyres etc during his ownership then the company foots the bill as it is a company asset/stock.

I thought this was a genius idea, but really quite risky sounding, and something that HMRC would have a field day with.

Apparently his accountant told him to get a 'car sales website' made for his company and have the car clearly advertised for sale on it, in case HMRC ever became interested.

But I thought I would ask the well informed of PH before even vaguely considering something like this myself.

[Eric Mc]

Lord Marylebone said:

Thanks for the input.

You have answered another question I was going to ask with regards to personal use and BIK.

The reason I'm asking is, that a friend of mine bought a supercar with money that his Ltd Co had spare in the bank, and plans to have it up for sale, but essentially keep it for a year and enjoy it here and there, and if it sells, it sells.

If it depreciates or needs tyres etc during his ownership then the company foots the bill as it is a company asset/stock.

I thought this was a genius idea, but really quite risky sounding, and something that HMRC would have a field day with.

Apparently his accountant told him to get a 'car sales website' made for his company and have the car clearly advertised for sale on it, in case HMRC ever became interested.

But I thought I would ask the well informed of PH before even vaguely considering something like this myself.

His company has provided him with a car for personal use. Therefore, he will be taxed on the PAYE Benefit in Kind arising..

[chml]

Lord Marylebone said:

chml said:

Various different things would come into play - off the top of my head (and just whilst I'm waiting for a meeting to start):

BIK if using the vehicle(s) for personal use
Margin VAT scheme - if Standard VAT registered then this wouldn't apply but depending on the numbers involved then it might be better to start NewLtdCo.


But in essence nothing to stop you doing it - a lot of LtdCos will buy a vehicle and then dispose of it regardless of their core business.

Thanks for the input.

You have answered another question I was going to ask with regards to personal use and BIK.

The reason I'm asking is, that a friend of mine bought a supercar with money that his Ltd Co had spare in the bank, and plans to have it up for sale, but essentially keep it for a year and enjoy it here and there, and if it sells, it sells.

If it depreciates or needs tyres etc during his ownership then the company foots the bill as it is a company asset/stock.

I thought this was a genius idea, but really quite risky sounding, and something that HMRC would have a field day with.

Apparently his accountant told him to get a 'car sales website' made for his company and have the car clearly advertised for sale on it, in case HMRC ever became interested.

But I thought I would ask the well informed of PH before even vaguely considering something like this myself.

Yeah, this wouldn't really fly. He might get away with it for a while but HMRC aren't daft and just having a for sale sign in it wouldn't make a bit of difference. Your friend should be paying BIK on the usage and also footing the bill for consumables etc as that would be coming from personal use. If it was as simple as your friends accountant suggested then everybody would just set up a LtdCo and put the car expenses through that.

[anonymous-user]

chml said:

Yeah, this wouldn't really fly. He might get away with it for a while but HMRC aren't daft and just having a for sale sign in it wouldn't make a bit of difference. Your friend should be paying BIK on the usage and also footing the bill for consumables etc as that would be coming from personal use. If it was as simple as your friends accountant suggested then everybody would just set up a LtdCo and put the car expenses through that.

Thanks. I thought it sounded risky/too good to be true.

Eric Mc said:

His company has provided him with a car for personal use. Therefore, he will be taxed on the PAYE Benefit in Kind arising..

So it is possible to use company money to buy a car of which ownership is retained by the company, as long as you pay the BIK for any personal use?

Is there any way to estimate what PAYE BIK would be payable under these circumstances?

EDIT:

Just found the HMRC BIK calculator and filled it in.

The results are horrific, and it is hardly surprising no one wants company cars anymore.

Oh well, there goes that idea!

Edited by anonymous-user on Friday 29th January 13:42

[Eric Mc]

Lord Marylebone said:

So it is possible to use company money to buy a car of which ownership is retained by the company, as long as you pay the BIK for any personal use?

Is there any way to estimate what PAYE BIK would be payable under these circumstances?

EDIT:

Just found the HMRC BIK calculator and filled it in.

The results are horrific, and it is hardly surprising no one wants company cars anymore.

Oh well, there goes that idea!

Edited by Lord Marylebone on Friday 29th January 13:42

There is no law (tax or otherwise) that prevents a limited company buying an asset (car, yacht, appartment, biz jet etc etc) for the use of its director(s). The problem is that there are massive tax implications.

Firstly, when a business buys an asset, it may be able to claim Capital Allowances on that asset. However, Capital Allowances for certain assets (especially motor cars), are very poor.
Secondly, when business owned (or leased) assets are made available to directors or employees for their personal use, there will always be a taxable Benefit in Kind arising. As you have discovered, the BIK costs relating to motor cars are pretty abysmal.

[anonymous-user]

Thanks for your input Eric.

[LaurasOtherHalf]

Isn’t there a loop hole of buying a track only race car? As in no BIK for road use?

[anonymous-user]

LaurasOtherHalf said:

Isn’t there a loop hole of buying a track only race car? As in no BIK for road use?

I imagine you could buy a race car, cover it in graphics advertising your business, use it on track days and claim it was some form of advertising tool.

But I imagine HMRC would still suggest you were 'taking the piss' in some way, and they would probably be right.

[trickywoo]

Electric cars are very favourably treated by the tax man at the moment. A Taycan through the business would be a goer.

[monkfish1]

Eric Mc said:

Lord Marylebone said:

So it is possible to use company money to buy a car of which ownership is retained by the company, as long as you pay the BIK for any personal use?

Is there any way to estimate what PAYE BIK would be payable under these circumstances?

EDIT:

Just found the HMRC BIK calculator and filled it in.

The results are horrific, and it is hardly surprising no one wants company cars anymore.

Oh well, there goes that idea!

Edited by Lord Marylebone on Friday 29th January 13:42

There is no law (tax or otherwise) that prevents a limited company buying an asset (car, yacht, appartment, biz jet etc etc) for the use of its director(s). The problem is that there are massive tax implications.

Firstly, when a business buys an asset, it may be able to claim Capital Allowances on that asset. However, Capital Allowances for certain assets (especially motor cars), are very poor.
Secondly, when business owned (or leased) assets are made available to directors or employees for their personal use, there will always be a taxable Benefit in Kind arising. As you have discovered, the BIK costs relating to motor cars are pretty abysmal.

But surely, if its NOT used for personal use, no benefit in kind takes place. In which case, surely its OK? ie, purely a money making venture. That may of course not the idea the OP had in mind.

[Eric Mc]

There was no indication in the original post that the car was specifically excluded from any “personal use” by a director or employee.
If a business buys a car that has absolutely Zero personal use associated with it then yes, it will escape any BIK charge.

But that is hardly ever the case.

[anonymous-user]

monkfish1 said:

But surely, if its NOT used for personal use, no benefit in kind takes place. In which case, surely its OK? ie, purely a money making venture. That may of course not the idea the OP had in mind.

I was hoping to have my cake and eat it, because a friend of mine is doing it, and it seems too good to be true.

Buy something keenly, put it up for sale, try to make a few quid.

But at the same time, put a few hundred miles on it and enjoy it as though it was your own car over the few months or year while it is up for sale.

His (possibly dodgy) accountant seems to think this is fine as long as as the car is ‘clearly advertised for sale on a website or similar’.

As for the milage done during ownership, the accountant suggests that no one will ever bother to check or verify how many miles the car has done between buying it and selling it, and therefore BIK etc doesn’t exist. It’s just a car for sale for the purposes of trying to turn a profit on it.

I was just wondering how dodgy all this was on the sliding scale of dodgy, and if it is something that people actually do.

Edited by anonymous-user on Friday 29th January 23:24

[Pit Pony]

Eric Mc said:

There was no indication in the original post that the car was specifically excluded from any “personal use” by a director or employee.
If a business buys a car that has absolutely Zero personal use associated with it then yes, it will escape any BIK charge.

But that is hardly ever the case.

I knew, about 8 years ago a company director who bought a motorcycle via his LTD company. He told me, he only ever used it for visiting clients sites. A pool bike if you like.

[UnluckyJoe]

Surely there is a fudge or way around the car tax thing, maybe there’s truth in the “if it’s advertised for sale” line.

My mate’s a sales guy at a car dealership, takes cars (demonstrators) home all the time, doesn’t pay any company car tax, he gets to keep them on his days off so certainty have some private use out of them. Occasionally has to run the cars back if someone wants to view it. He can’t be the only one or place where this happens.

[anonymous-user]

UnluckyJoe said:

Surely there is a fudge or way around the car tax thing, maybe there’s truth in the “if it’s advertised for sale” line.

My mate’s a sales guy at a car dealership, takes cars (demonstrators) home all the time, doesn’t pay any company car tax, he gets to keep them on his days off so certainty have some private use out of them. Occasionally has to run the cars back if someone wants to view it. He can’t be the only one or place where this happens.

As far as I can see, the fudge involves lying to HMRC and hoping they don’t find out.

Clearly the guy I know, and they guy you know, are both using cars in their possession for private journeys, without declaring it.

[Eric Mc]

Pit Pony said:

I knew, about 8 years ago a company director who bought a motorcycle via his LTD company. He told me, he only ever used it for visiting clients sites. A pool bike if you like.

The rules regarding motor cycles are much more generous than for motor cars.

If you can buy a "car" that is designated as a "Commercial Vehicle" by HMRC, then you will also be able to avail of more generous tax rules.

There are also helpful tax rules regarding pedal cycles.

The problem with claiming that something is in a "pool" is that the rules describing what constitutes a "pool" asset are very clearly set out by HMRC. Very few assets can really qualify, especially if the company is a single director company which is run from the director's home.

[Eric Mc]

Lord Marylebone said:

I was hoping to have my cake and eat it, because a friend of mine is doing it, and it seems too good to be true.

Buy something keenly, put it up for sale, try to make a few quid.

But at the same time, put a few hundred miles on it and enjoy it as though it was your own car over the few months or year while it is up for sale.

His (possibly dodgy) accountant seems to think this is fine as long as as the car is ‘clearly advertised for sale on a website or similar’.

As for the milage done during ownership, the accountant suggests that no one will ever bother to check or verify how many miles the car has done between buying it and selling it, and therefore BIK etc doesn’t exist. It’s just a car for sale for the purposes of trying to turn a profit on it.

I was just wondering how dodgy all this was on the sliding scale of dodgy, and if it is something that people actually do.

Edited by Lord Marylebone on Friday 29th January 23:24

I hope that this accountant is paying close attention to the terms and conditions of his Professional Indemnity Insurance. His tax advice seems to be based on the likelihood of "being caught" rather than the correct application of the rules.