Company car finance lease

[Viktor]

So, as another year knocks in I will renew the wheels...I was thinking to go for a car finance lease, but don't know what disadvantages do I have if I want to return the car after 2 years.
Basically I want to offset the payments against tax and recover 50% of the VAT paid (I am on flat rate VAT so I need to have the car as an asset > £2,000...). After 24 months I might return the car so I need some flexible arrangements. Any other methods apart from finance lease and contract hire?

Ta

[mrdavies]

Hi there, I recently considered doing the same but when I asked my accountant for advice they said its not worth it and its better to use personal car and claim mileage.

When I asked why, all I was told was that the tax advantages are outweighed by the disadvantages.. I would like to have had a better explanation really.. in the end I did a personal finance agreement as before.

Surely getting a personal contract hire through a ltd would be better though...? Even the garage I went to advised against me doing it like that in my situation...!

Cheers

mrdavies

[Nixon Williams]

So, as another year knocks in I will renew the wheels...I was thinking to go for a car finance lease, but don't know what disadvantages do I have if I want to return the car after 2 years.
Basically I want to offset the payments against tax and recover 50% of the VAT paid (I am on flat rate VAT so I need to have the car as an asset > £2,000...). After 24 months I might return the car so I need some flexible arrangements. Any other methods apart from finance lease and contract hire?

Ta

If the company buys the car you cannot claim any VAT back whether on the Flat Rate Scheme or not.

If the car is leased you can claim 50% of VAT on the lease cost (100% on the maintenance element, if any) but only if you are NOT on the Flat Rate Scheme.

Car leases tend to be pretty inflexible and commit you to a certain time and mileage etc.

I would guess that yoiu will be better off buying the car privately and claiming a mileage rate.

Alan

[Nixon Williams]

When I asked why, all I was told was that the tax advantages are outweighed by the disadvantages.. I would like to have had a better explanation really.. in the end I did a personal finance agreement as before.

Surely getting a personal contract hire through a ltd would be better though...? Even the garage I went to advised against me doing it like that in my situation...!

Cheers

mrdavies

The tax on each car differs but is based on the list price of the car and how "clean" the car is. The tax benefit is then a percentage of the list price upto 35%. You are then taxed at 22%/40% on this sum.

The company has restrictions on what it can claim against tax and the company pays NIC on the benefit.

The mileage rate is tax free - if you own the company it is usually very clear to avoid company cars. If you do not own the company there may be some merit in one, but I guess most people on here work for themselves.

I hope this clears it up?

Alan

[Mustang]

This is an area that one of us (or someone out there) should do a study on. In general, my accountant has also advised to do the personal purchase/mileage claim option rather than get the company involved in paying for the car.

I have taken his advise but would like to see some figures supporting it that are in line with all HMRC rules. Taking into account offsetting running costs including petrol, does it still work out cheaper?

Guess I have a mini project to do at some point......unless someone beats me to it!!

[Nixon Williams]

This is an area that one of us (or someone out there) should do a study on. In general, my accountant has also advised to do the personal purchase/mileage claim option rather than get the company involved in paying for the car.

I have taken his advise but would like to see some figures supporting it that are in line with all HMRC rules. Taking into account offsetting running costs including petrol, does it still work out cheaper?

Guess I have a mini project to do at some point......unless someone beats me to it!!

Ask your accountant to do one, we would do so for our clients, but each case is different depending on the car, business travel etc. For as long as I can remember I have not come across one single client that would have been better off with a company car.

Alan

[mrdavies]

The tax on each car differs but is based on the list price of the car and how "clean" the car is. The tax benefit is then a percentage of the list price upto 35%. You are then taxed at 22%/40% on this sum.

The company has restrictions on what it can claim against tax and the company pays NIC on the benefit.

The mileage rate is tax free - if you own the company it is usually very clear to avoid company cars. If you do not own the company there may be some merit in one, but I guess most people on here work for themselves.

I hope this clears it up?

Alan

Thanks for that explanation. Sure my accountant would have told me this if i had asked, i'm happy with them but they certainly don't volunteer information/advice. It seems to be an art in itself asking the right question, then they come back with good answers

[ratewhore]

Funnily enough, the accountants advice I received was that, as a company owner, there is little difference between contract lease (as I do) and leasing personally (as I didn't want to own a depreciating asset and I'm not doing many miles).

Each to their own I guess...

[tim123]

Funnily enough, the accountants advice I received was that, as a company owner, there is little difference between contract lease (as I do) and leasing personally (as I didn't want to own a depreciating asset and I'm not doing many miles).

I don't get this.

It matters not whether you own the vehicle or if someone else does and leases it back to you. You are still going to be the one paying for the depreciation, no-one else is going to pick up the tab.

tim

[Viktor]

Claiming mileage on personal car is good when you own a cheap second hand car and you do many miles.
In fact you need to take into account that in order to buy say £12,000 new car you actually pay £14,280 (including the cost of dividends) plus the running costs (fuel, maintenance etc.) and all this with dividend on top (add 19%).
So if you can claim £4,000 mileage doesn't sound a big deal, on a company car besides 50% VAT on finance lease and contract hire you can add running costs against tax.
For accountants it's simple to calculate mileage against tax so I think their advice is a little biased...