Changing travel arrangements in light of the proposed expenses rule.

[DaveB]

Thinking ahead to next year I'm looking at ways to mitigate the possible changes to T&S.

I'm currently doing a lot of miles and claiming the usual 45p per mile. This gets me about £750 month in travel expenses.

With the proposed changes turnng this into taxable income this would put me into the upper tax rate (40%) so I could end up paying around £300 a month in tax on this. I currently take salary and divis up to the lower rate limit.

Up until now it's always been the assumption that using a personal vehicle and claiming milage allowances was the most efficient way to manage the costs.

Under the proposals it now looks like leasing a car through the company and only claiming actual fuel costs might actually be better.

Cursory searches say I can get a 5 Series BMW through a company lease that will costs me £145 per month in BIK tax. Something cheaper would cost me less.

Business fuel costs come in at around £160 per month, so claiming that back would cost me £32 in tax under the proposals. Total personal cost £177 per month. Company pays the lease and maintenance costs, so no further cost to me personally, and those costs get set against CT for the company.

I could then sell the current car ( not that it's worth much ) and that would actually cancel out the tax liabilities for the first year, and leave me with a new car. The year after my tax bill would go up, but not as much as paying tax on the current expenses.

I'm not an accountant and these are back of a fag packet figures, but right now it looks like they stack up.

Have I missed something fundamental?

[northernladuk]

Yeah.. A lot may change before what we think might happen happens.

You might be missing excess mileage charges if you do a lot if miles?

[DaveB]

Yeah.. A lot may change before what we think might happen happens.

You might be missing excess mileage charges if you do a lot if miles?

I did say I was just thinking about it, not that I was going to rush out and do it. Yes it might not come to pass, but it can't hurt to at least explore some options just in case.

Excess milage charges would be picked up by MyCo. not by me and would depend on the lease conditions. Whatever the cost to MyCo. the BIK cost to me stays the same as it's based on the value of the vehicle.

[northernladuk]

I did say I was just thinking about it, not that I was going to rush out and do it. Yes it might not come to pass, but it can't hurt to at least explore some options just in case.

Excess milage charges would be picked up by MyCo. not by me and would depend on the lease conditions. Whatever the cost to MyCo. the BIK cost to me stays the same as it's based on the value of the vehicle.

But even if your ltd picks them up you end up taking the hit ultimately so you have to consider them surely? You lease a company car and then end up in a gig doing 20k+ miles the charges will be eye watering. Worth crunching some numbers I think.
At the very least check the mileage limits on a company lease.

[pr1]

are you purely thinking about money in your pocket per year, or money spent by you/yourco combined?

i think your plan will be better for the former but worse for the latter

[northernladuk]

There are a few good calculators out there for company cars. There is one on the Gov website and one on comcar. CO. UK goes in to a lot of detail. I also had a quick play changing the mileage on a lease site and it makes quite a difference to price. Just saying it might be worth considering if you are looking at the whole picture.

[ContrataxLtd]

Hi DaveB

If the proposed new rules come in then company cars may well be a good way to go, depending on personal situation of course. Those with a very high business mileage would normally be the ones that this would potentially help as they'd be 'missing out' on a large mileage claim otherwise.

You have to be careful about working out the BIK costs though because generally expensive cars will have quite a large BIK value which is not only taxed at your marginal rate but also uses up some of your basic rate band in which dividends would have been taxable at 7.5% (assuming no changes to divi tax). Another consideration here is that you could potentially drop your salary down to avoid some tax on the BIK.

The standard BIK calculators on car websites aren't generally detailed enough to give you a comprehensive breakdown so it's definitely one for your accountant to crunch some numbers on if the proposed changes do come in.

Martin
Contratax Ltd

[SimonMac]

Have you factored in the increase in BIK rates over the next few years? The lowest 5 Series I can find is 109 g/km, this year that is 19% but will be 25% by 2019/2020

https://www.theaa.com/resources/Docu...bik-2014on.pdf

[TykeMerc]

When the situation is resolved and we know what regime we have to work with, then those of us that do a fair bit of T&S expensing will have to consider our options carefully.
Leasing a car isn't something I'd even considered as it's been such a bad option for years, maybe it will be worth it in the long run.
Accommodation costs are going to be at least as much of a concern as travel.

[ContrataxLtd]

When the situation is resolved and we know what regime we have to work with, then those of us that do a fair bit of T&S expensing will have to consider our options carefully.
Leasing a car isn't something I'd even considered as it's been such a bad option for years, maybe it will be worth it in the long run.
Accommodation costs are going to be at least as much of a concern as travel.

This hits the nail on the head. As soon as the situation is resolved options can then be planned for. I for one will be looking at some general situations so that all my clients can be advised of ways to possibly mitigate any changes that happen so I'm sure that you'll have plenty of options posted on here to consider once things get confirmed either way.

Martin
Contratax Ltd