Buying a car through a business

[N111AOW]

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.

There is generally an awful lot of rubbish spouted about company car tax - and there's a bit on here too!. I speak as an accountant with a company car. Doing a high mileage (30k pa) and working where the scheme has fairly rubbish cash alternative makes it very much worth my while having a company car even with tax on the benefit - if I took the cash alternative, I'd pay tax on that too.

Speaking as an accountant - I agree with the first part of what Leigh says.

However, IMHO it's not necessarily true that it's most efficient tax-wise to run the car privately, claiming 40p/25p privately for business miles - although that is almost certainly the simplest option. It's going to depend on the CO2 emissions of the car (which dictate company car tax together with list price when new), how many business and private miles you do and what are the running costs of the car.

By way of illustration, if you ran a Toyota Prius through the business (selected due to v low co car tax) I think the company car tax is based on just 10% x the list price of around £20k - ie, you'd pay tax on £2k - £800 for higher rate taxpayer. But if you ran, say, an ML 320 you'd probably pay tax on 35% of the original list price ie £5,600 tax (say £40k list price x 35% co car rate x 40% tax rate), some £4,800 extra

With the Prius, you'd pay tax on £2k of income but it would probably cost around £5k or so a year to run - hence £3k "tax-free" income and very worthwhile running through the company - all (or nearly all) the £5k would be allowed as a deduction for tax purposes in the company (possible changes might even give you extra tax beneftis in the company for having low-CO2 car). With the ML, you would probably not get £14k-worth of benefit from having the car so you'd almost certainly be better off running as a private car and taking 40p/25p expenses per mile.

Bear in mind that HM Revenue and Customs are currently running a consultation as to how the 40p/25p rates should be changed. it is not clear what they'll do but possible options include:
1. reduce the 10k miles threshold, so the higher rate is available for fewer miles
2. reduce the 40/25 figures for high-CO2 cars and/or increase them for low-CO2 cars

The above is not a comprehensive list of what you'd need to take into account - you need a clued-up accountant who deals with this stuff regularly.

Anyway - hope this helps!

 

[imadoofus]

With the Prius, you'd pay tax on £2k of income but it would probably cost around £5k or so a year to run - hence £3k "tax-free" income and very worthwhile running through the company

Except that the £5k a year to run will include fuel (if it doesn't, then a Prius is damned expensive to run!), and your tax calculations don't.

As well as the £800 BiK liability, there will also be a Fuel Benefit Liability, unless you're paying for your own private mileage, in which case your argument doesn't really stand up.

PJ

 

[Dryce]

With the Prius, you'd pay tax on £2k of income but it would probably cost around £5k or so a year to run - hence £3k "tax-free" income and very worthwhile running through the company

"run a Prius" and "very worthwhile" don't really add up unless actually want to run a Prius.

 

[N111AOW]

Imadoofus:

I'll accept my figures were only approximate but I reckon on a car bought new (excluding fuel) costing me around 25% of the new cost each year, taking into account, depreciation, road tax, . I have not fogotten about fuel, I have deliberately omitted it from all sides of the equation, so as to ensure I'm comparing like with like

It is almost never worthwhile having private fuel paid for by your own company - but it could be if you did a lot of private mileage

Dryce

I used the example of a prius because it was simple and illustrates the extreme tax-saving position. I am aware that this is a Mercedes forum

 

[LeighW]

Speaking as an accountant - I agree with the first part of what Leigh says.

However, IMHO it's not necessarily true that it's most efficient tax-wise to run the car privately, claiming 40p/25p privately for business miles - although that is almost certainly the simplest option. It's going to depend on the CO2 emissions of the car (which dictate company car tax together with list price when new), how many business and private miles you do and what are the running costs of the car.

Point taken. However, this is a Merc forum, as you say, and i maintain that for someone with their own company, who runs a 'normal' car, who's business mileage is considerable, that it is more tax efficient overall to own the car personally and claim mileage. There are always exceptions to the rule, agreed.