Personal or Company Lease Advice

[tjamesbo]

My Colleague director is considering leasing a Mercedes GLA One of the questions is
Personal lease Deal ... or ....
Our company leases it , he then makes the lease payments that he would have made to the company .......
Company Benefits as lease offsett against Company tax ?
He Benefits as His lease Payments to the company negate his Benefit in Kind ?
Lease Payment is £299 month so that is what he will pay the company ( or that minus the VAT if company can claim back )
Anyone any knowledge of this its an area i know little about as i run exclusively older mercs
Thanks Boyd
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[Red C220]

It's either all in or all out of the business.

Out is by far the cheapest option.

Even if you ran it through the company you can only reclaim 50% of the vat on a private car unless it's a pool car (very tight restrictions on where it's kept and how it's used).

BIK tax outweighs and tax advantages through the business.

I haven't run a car through our company for at least 5 years now.

You can of course reclaim business mileage through the business at the prevailing rate.

 

[Primo]

Check out the BIK on a C350e!

 

[gIzzE]

Our company leases it , he then makes the lease payments that he would have made to the company .......

Company Benefits as lease offsett against Company tax ?

He Benefits as His lease Payments to the company negate his Benefit in Kind ?

The moment it is done through the company he will pay BIK tax, and it will probably be more than the lease.

I know people who set it up in the company name but, the employee pays the lot, deposit, monthly payments, fuel, servicing, tyres etc. etc. and it all comes from their bank account, the company is acting as guarantor and nothing more.
They then pay no BIK tax.

If they leave it then becomes a pool car or if someone else takes it on as a company car they will be hit with BIK Tax, or someone else may take over the payments and avoid BIK Tax.


Also, be careful when leasing, often the cheaper cars are no cheaper to lease than more expensive metal.

A new C350e as said above can be had from £219 a month with 9 months down, so £290+vat a month all in including deposit, at the moment, some of the E Classes far less.



Edit: Just adding the C350e deal before someone says it's ********....

https://www.contracthireandleasing....sheep-leasing/mercedes-benz/c-class/73665484/

 

[Rory]

I know people who set it up in the company name but, the employee pays the lot, deposit, monthly payments, fuel, servicing, tyres etc. etc. and it all comes from their bank account, the company is acting as guarantor and nothing more.
They then pay no BIK tax.

If they leave it then becomes a pool car or if someone else takes it on as a company car they will be hit with BIK Tax, or someone else may take over the payments and avoid BIK Tax.

Hmmm...that's iffy to say the least.

BIK is assessed on the P11D value (so completely separate from the lease cost) of having a company car that is made available for private use. It doesn't mater how much it costs the company - if they get it free, in this case because the employee repays the lease cost, it makes no difference.

What you can do is make a contribution towards the private use of the car and that contributuon reduces the BIK liability. That may or may not be a similar amount to the lease cost - you'd have to do the maths on a car-by-car basis to figure that out.

There are numerous HMRC cases about this - there's one often referred to case where they did the repayment thing from Directors loan accounts and reclaimed the VAT.


Insurance also becomes complicated as you generally can't insure a car leased to a company on a normal consumer policy - some people apparently do this but without making it clear that the lease isn't in their name.

 

[gIzzE]

Hmmm...that's iffy to say the least.

BIK is assessed on the P11D value (so completely separate from the lease cost) of having a company car that is made available for private use. It doesn't mater how much it costs the company - if they get it free, in this case because the employee repays the lease cost, it makes no difference.

What you can do is make a contribution towards the private use of the car and that contributuon reduces the BIK liability. That may or may not be a similar amount to the lease cost - you'd have to do the maths on a car-by-car basis to figure that out.

There are numerous HMRC cases about this - there's one often referred to case where they did the repayment thing from Directors loan accounts and reclaimed the VAT.


Insurance also becomes complicated as you generally can't insure a car leased to a company on a normal consumer policy - some people apparently do this but without making it clear that the lease isn't in their name.

I spoke to HMRC about this at length, basically the company acts as guarantor, and will take over the lease if anything happens to the employee.

At the end of the day, if no paperwork ever goes to anyone other than the employee, unless they leave, then it really isn't a problem, until they leave.

 

[markjay]

The moment it is done through the company he will pay BIK tax, and it will probably be more than the lease.

I know people who set it up in the company name but, the employee pays the lot, deposit, monthly payments, fuel, servicing, tyres etc. etc. and it all comes from their bank account, the company is acting as guarantor and nothing more.
They then pay no BIK tax.

If they leave it then becomes a pool car or if someone else takes it on as a company car they will be hit with BIK Tax, or someone else may take over the payments and avoid BIK Tax.

Also, be careful when leasing, often the cheaper cars are no cheaper to lease than more expensive metal.

A new C350e as said above can be had from £219 a month with 9 months down, so £290+vat a month all in including deposit, at the moment, some of the E Classes far less.

Edit: Just adding the C350e deal before someone says it's ********....

https://www.contracthireandleasing.com/car-leasing-companies/independent-brokers/mad-sheep-leasing/mercedes-benz/c-class/73665484/

What happens after 24 months - do you just hand back the car? Or is there an agreed value?

 

[Rory]

I spoke to HMRC about this at length, basically the company acts as guarantor, and will take over the lease if anything happens to the employee.

The guarantor element is one of things that is causing HMRC to get anxious about car salary sacrifice schemes - the employee has no risk of ownership, so that's a benefit.

At the end of the day, if no paperwork ever goes to anyone other than the employee, unless they leave, then it really isn't a problem, until they leave.

I've seen that suggested a lot for small companies - basically don't report it so no-one knows. Pay the lease cost from a personal bank account, not the company one.

It's dodgy accounting but I suppose it's fine unless HMRC catch you. They could cross check with leasing companies but whether they have the capability or interest in doing that, I don't know.

 

[gIzzE]

Yeah, it is a contract hire/lease.

No chance of buying at the end, but then why would you?

 

[gIzzE]

The guarantor element is one of things that is causing HMRC to get anxious about car salary sacrifice schemes - the employee has no risk of ownership, so that's a benefit.



I've seen that suggested a lot for small companies - basically don't report it so no-one knows. Pay the lease cost from a personal bank account, not the company one.

It's dodgy accounting but I suppose it's fine unless HMRC catch you. They could cross check with leasing companies but whether they have the capability or interest in doing that, I don't know.

Alot of BIK tax is an absolute sham imho.

My company, in fact not the company but the bank, makes me have medical care and keyman insurance, this is in case I am ill they have someone to do my role and makes sure I am back in asap.
I get taxed for this!
It is no benefit to me as far as I am concerned, I have family medical already and how is keyman insurance a benefit to me?



Then with cars, I have to have a car that does 40mpg or more and sub 149g/km co2.
Problem is I have no where at work to leave the car at night, and I have no where at home to leave a third car either.
So I end up driving a 2 litre diesel as my main car that I don't want to be in.
My M3 had to go and ML had to go.
How the **** is that a benefit?

To then be told I will be charged £321 BIK tax on a car that costs £315 a month is a ****ing joke!
That is with no fuel allowance, me paying for all fuel.
If I pay for the bloody thing myself I am £6 a month better off, that is more of a benefit.


Make it a fair system and people will play the game, but when it is so messed up why should they.

Now, £315 a month equals £3780, 40% of £3780 is £1512.

Now put bands on...
0g/km = 75% discount
99g/km or less = 60% discount
150g/km = 40% discount
199g/km = 10% discount
200g/km or more no discount.


So I would be taxed £75 a month on my £300 a month car, roughly 25% of the value.

That to me is far fairer.

 

[gIzzE]

It makes little difference to me, as I have a good relationship with Lombard now, I have gone from guaranteeing the funding for the company as a director in the early years, to now putting it all in my name anyway.

But for many, just getting the company to act as guarantor can get them into the cheaper lease deals that are often offered as 'business leases' rather than the more expensive 'personal leases' which obviously are loaded more due to higher risk. They will often match the business rates, but not always.