Buying a car through a business

[BenzComander]

Can someone explain the main differences (Pro's/Con's) there are between buying a car (PCH) through a business or personally.

I assume that when arranging the deal personally the credit agreement is made out to a person, whereas if the deal is done in the name of a business then the business name is on the agreement. Or is this only if the business is limited??

Thanks!

 

[television]

If the company buys the car, then it is registered in the companies name, and a certain amount will be off set to the driver if he takes it home. The driver will then have to pay the tax on that proportion.

When purchasing on credit, the finance house will require a guarantor if a Ltd company with not many paid up shares, or limited to a low value.

There are a special set of rules available from HMSO Its then up to you as to how you go about it Tax wise

 

[BenzComander]

So, if not a limited company, but a sole trader there is not much benefit in registering the car in the business name??

 

[ceejaySL]

......... if you are vat registered and buy a vat qualifier you can also get the proportion of vat back on a lease, BUT have to sell the car with vat on it and class it as an input at a later date............

HMRC have tax rules both if its a company car and you get it as payment in kind , or if you charge your comapany for the use of your car. You will pay either way, and dependant on your miles and what its 'worth' to you will make its value to you.

 

[Alfie]

So, if not a limited company, but a sole trader there is not much benefit in registering the car in the business name??

There is very little if anything to be gained by running your car through your business.

If you use the car at all for any personal use, then it becomes a tax liability. I was looking to buy and run the A class through the business but my accountant advised me that a). the car must be available for all staff, B). must reside at the business premises when not in use and c). every mile must be a business mile or else taxation looms! It is far easier to run the car myself and claim 40p per mile for busines use.

 

[BenzComander]

There is very little if anything to be gained by running your car through your business.

If you use the car at all for any personal use, then it becomes a tax liability. I was looking to buy and run the A class through the business but my accountant advised me that a). the car must be available for all staff, B). must reside at the business premises when not in use and c). every mile must be a business mile or else taxation looms! It is far easier to run the car myself and claim 40p per mile for busines use.

Thanks Alfie, where did you get the figure of 40p a mile?

 

[ceejaySL]

......... but you may want to loose some profit and stop paying tax on that. In which case through the business could make sense............

 

[television]

My best friend runs his 6 cars through his business including his new 221, why 6 cars, its the max tax allowance that he can get for the size of his business.

Do get the details from any tax office

 

[Alfie]

My best friend runs his 6 cars through his business including his new 221, why 6 cars, its the max tax allowance that he can get for the size of his business.

Do get the details from any tax office

Yes but he will be liable for higher income tax should he use any of those cars for personal use. Even travelling to/from your normal place of work is included. That is unless he has the same accountant as you Malcolm!

 

[janner]

Definitely one for an accountant.
In most cases it's worth doing what Alfie does ie. finance the car yourself and claim 40p/mile for business use. You have to keep some sort of records to justify 'business miles' but it's still the easiest and most efficient way for 99% of people.

 

[television]

Yes but he will be liable for higher income tax should he use any of those cars for personal use. Even travelling to/from your normal place of work is included. That is unless he has the same accountant as you Malcolm!

Thanks Alfie, he has 2 large companies, so the chances are that they are split between the 2


Funny thing is that I have paid more tax as a pensioner this last few years than all of my working life put together

 

[Alfie]

Thanks Alfie, he has 2 large companies, so the chances are that they are split between the 2


Funny thing is that I have paid more tax as a pensioner this last few years than all of my working life put together

Come come now Malcolm, surely the 20 years of not paying any tax has helped the retirement fund has it not

 

[LeighW]

If it's a non limited business you have, ie sole trader or partnership, you can run the car through the business, claiming for all running costs (rfl, insurance, repairs, fuel, interest on hire purchase etc). A proportion for private usage (based on your actual % of private usage) will be disallowed for tax purposes. If it's a limited company you have, the most tax efficient method is to buy the vehicle and run it privately, then claim mileage from the company for yourself. The maximum allowable rate for this is 40p per mile for the first 10000 miles in any one tax year, and 25p per mile above this. You should keep fuel receipts and very detailed records of all busines trips to support these claims.
Hope this helps.

Leigh the accountant.

 

[R2e]

Thanks Alfie, where did you get the figure of 40p a mile?

HMRC publish this somewhere, it's laid down by them. When I started my business (last century!) my accountant's advice was don't get a company car, but if you must get one more than four years old (the tax is/was a lot less, don't know if this still applies). I believe you have to apply to claim the business rate. It's currently 40p a mile for the first 10,000 miles, 25p per mile thereafter.

 

[television]

Come come now Malcolm, surely the 20 years of not paying any tax has helped the retirement fund has it not

Sadly this is not the case, for he who tries to dodge too much loses out in the end, as one can never expand to any advantage, for if you do not show that you have any money, then money under the bed becomes worthless. Had I used what I had, and brought it out into the open I could have done much more, and very much better.

In the 70's my best friend bought a shop, and one was offered to me, I said no thanks, my friend now has 75 factories and shops, and I just have my house.
I have loved every day of my working life (55 years) and never been off sick once, I am in much better health than my friend and am happy and going to buy some goodies for the car to compensate.

 

[Alfie]

Sadly this is not the case, for he who tries to dodge too much loses out in the end, as one can never expand to any advantage, for if you do not show that you have any money, then money under the bed becomes worthless. Had I used what I had, and brought it out into the open I could have done much more, and very much better.
............

Hmm...I thought you said you got more than 20 years tax free'

I had a good run on tax, my first accountant fled to Jersey after 9 years and I did not pay 1 penny, the second and third fled to india after a number of years, so I got more than 20 years tax free

In this thread http://www.mbclub.co.uk/forums/showpost.php?p=407895&postcount=46

 

[Rory]

HMRC publish this somewhere, it's laid down by them. When I started my business (last century!) my accountant's advice was don't get a company car, but if you must get one more than four years old (the tax is/was a lot less, don't know if this still applies). I believe you have to apply to claim the business rate. It's currently 40p a mile for the first 10,000 miles, 25p per mile thereafter.

Be careful here though - as Leigh has pointed out the tax treatment of Ltd company employees (inc Directors) vs sole traders are very different.

The 40p/25p (under 10K miles/over 10K miles) is the max you can claim *tax-free* through your limited company for business use of your own car. *Or*, you could claim nothing from your company, but instead reclaim the same amounts from HMRC. In that case you only get the tax back, at your normal rate, so for 40% payers, 16p/10p.
Most 'opt-out' company car schemes pay a monthly allowance (maybe £500) which is taxed as normal, plus, typically, 15p per business mile. In this case you can claim the difference back from HMRC. Again, it's only the tax you get back, so you'd get 10p/4p, meaning you're getting 25p/19p in total for your business miles.

 

[television]

Hmm...I thought you said you got more than 20 years tax free'



In this thread http://www.mbclub.co.uk/forums/showpost.php?p=407895&postcount=46

That was back in the 60's to 80's a different time in my life

 

[comports]

My accountant advised exactly the same as Alfie's in post 5. I have my private car that I claim business use of and suffer 20% of the costs personally and 80% of it's use is business. And again this includes tax, insurance, running costs etc...

 

[Alfie]

That was back in the 60's to 80's a different time in my life

But its still 20 years of no tax! Thats an awfully long time.