Business Paying for Car Lease, Employee refunding 100%, no mileage claimed

[jrinns]

Hi All,

Long time lurker, first time poster. I've Googled this and searched and don't seem to pull the correct results back.

I've emailed my accountant but I think they've all gone to the Caribbean...

So a quick one, if the company pays for a 2 year car lease and the employee contributes 100%, is any BIK invoked if no mileage or anything else is claimed from the business.

I know its a strange one but the business lease works out a lot cheaper than a personal lease. No VAT etc would be claimed back if possible as I'm flat rate.

Employee would be £36000 earner made of salary and dividends.

Any advice appreciated.

[Greg@CapitalCity]

Seems a bit controversial, but in an almost identical case a First-tier Tribunal found the repayment of lease costs made no difference, and the Directors were taxed on the BIK of having a company car supplied to them.

Take a look at;
Stanford Management Services Ltd & Ors v Revenue & Customs [2010] UKFTT 98 (TC) (01 March 2010)

[Martin at NixonWilliams]

Hi All,

Long time lurker, first time poster. I've Googled this and searched and don't seem to pull the correct results back.

I've emailed my accountant but I think they've all gone to the Caribbean...

So a quick one, if the company pays for a 2 year car lease and the employee contributes 100%, is any BIK invoked if no mileage or anything else is claimed from the business.

I know its a strange one but the business lease works out a lot cheaper than a personal lease. No VAT etc would be claimed back if possible as I'm flat rate.

Employee would be £36000 earner made of salary and dividends.

Any advice appreciated.

Hi jrinns,

The BIK would still apply. However, you can make a contribution of up to £5,000 to mitigate the BIK - the remainder would still be taxable.

In a lot of cases the lease costs are the same whether taken out personally or through the business. The business lease price is simply advertised net of VAT in order to attract the customer.

Note that the input VAT is restricted to 50% where the vehicle is made available for private use. It may be better for you to withdraw from the flat rate scheme depending on your circumstances. The link below provides details of what can be reclaimed.

HM Revenue & Customs: Cars and motoring expenses: reclaiming VAT

That isn't it, there are further tax restrictions! The Corporation Tax relief is restricted to 85% for cars registered after 1st April 2009 where the emissions exceed 160 g/km. Cars emitting less than this will still be eligible for relief based on 100% of the cost.

I hope this helps.

Martin

[jrinns]

Thanks for the replies.

the BIK would still apply. However, you can make a contribution of up to £5,000 to mitigate the BIK - the remainder would still be taxable.

So the £5000 is the contribution per year ? or over the lease to the total cost of car.

In a lot of cases the lease costs are the same whether taken out personally or through the business. The business lease price is simply advertised net of VAT in order to attract the customer.

Sadly not the case on this one, its a 2 or 3 year lease which is heavily subsidized. A 4 year lease at the rate plus VAT is available but I dont want the 4 year.

It looks as this is a no go via the business.

[jrinns]

Seems a bit controversial, but in an almost identical case a First-tier Tribunal found the repayment of lease costs made no difference, and the Directors were taxed on the BIK of having a company car supplied to them.

Take a look at;
Stanford Management Services Ltd & Ors v Revenue & Customs [2010] UKFTT 98 (TC) (01 March 2010)

Weren't these guys also claiming back mileage etc ? We wouldn't have claimed anything back so in essence the business pays £250 a month DD. We pay into the business £250. The business would then not claim relief on anything. Is this not possible?

[jrinns]

Hi jrinns,

The BIK would still apply. However, you can make a contribution of up to £5,000 to mitigate the BIK - the remainder would still be taxable.

In a lot of cases the lease costs are the same whether taken out personally or through the business. The business lease price is simply advertised net of VAT in order to attract the customer.

Note that the input VAT is restricted to 50% where the vehicle is made available for private use. It may be better for you to withdraw from the flat rate scheme depending on your circumstances. The link below provides details of what can be reclaimed.

HM Revenue & Customs: Cars and motoring expenses: reclaiming VAT

That isn't it, there are further tax restrictions! The Corporation Tax relief is restricted to 85% for cars registered after 1st April 2009 where the emissions exceed 160 g/km. Cars emitting less than this will still be eligible for relief based on 100% of the cost.

I hope this helps.

Martin

The emissions are 115. It states the BIK at 20% is 756.84 and 40% £1513.68.

So for a person who is at the threshold of 36k then this would cost an additional £1513 a year hence removing any potential savings.

[rd409]

Weren't these guys also claiming back mileage etc ? We wouldn't have claimed anything back so in essence the business pays £250 a month DD. We pay into the business £250. The business would then not claim relief on anything. Is this not possible?

IANAL, but can you not just pay from your own account; Just use the name of the company? I am sure, this would incur no BIK, as no money leaves the company. Check the T & C first though.

[northernladuk]

We have been through a whole host of permutations around company cars and none of them gave any savings except maybe a sub 110mg car and those were hardly worth the effort for return.

I am certain if there was a viable option it would already be public knowledge like gifting shares, xmas does and the like so the fact there are 1m+ contractors and virtually no one has a company car speaks volumes.

[jrinns]

We have been through a whole host of permutations around company cars and none of them gave any savings except maybe a sub 110mg car and those were hardly worth the effort for return.

I am certain if there was a viable option it would already be public knowledge like gifting shares, xmas does and the like so the fact there are 1m+ contractors and virtually no one has a company car speaks volumes.

This is not to save money from the business, this is simply to get the deal that is ONLY available to corporate. As someone has said, maybe get it in the business name but comes out of Personal Account? Any issues with this from a TAX perspective? I will ask sytner if this could be done.

If not I wil simply have to pay more for a personal lease.

[northernladuk]

This is not to save money from the business, this is simply to get the deal that is ONLY available to corporate. As someone has said, maybe get it in the business name but comes out of Personal Account? Any issues with this from a TAX perspective? I will ask sytner if this could be done.

If not I wil simply have to pay more for a personal lease.

See what they say but using the business as a vehicle for personal gain doesn't sound right at all and comes with it's own set of warnings even it was allowable and worth it....

I think stick your hand in your pocket and pay it yourself is the only option for all the reasons already mentioned.