purchasing a company car... but not sure on future trading

[lifexplorer]

Hello everyone,

I've seen a particularly great deal on an pure electric vehicle I was thinking of otherwise leasing (had a separate thread around this previously). Basically was a demo model with next to no mileage for the 2019 version of the car, going for about 25% less than buying the new 2020 version. Would be a bit of BIK for the tail end of this tax year, but 0% for the next tax year, 1% the year after.

However like many people here my trading situation is in a bit of flux... I may see an outside IR35 renewal where I am or I may take a an offer for a perm role at a small consultancy come March/April, with a view to potentially switching back to day rate contracting if the market changes in, say, a year or so...so not looking to do MVL at this time.

Either way, I'd benefit from buying the car today. Just wondering if there'd be any issues if I was to buy the car today from my company reserves while still trading, and kept in the company / made use of it personally if not trading for an extended period. Any other issues to consider if I decide to pursue MVL later (in say, 12-18 months I decide the market for outside IR35 contracting shows not signs of recovering). Thinking I'd try to sell the car from company to me personally at that point at FMV to simplify the MVL process.

Thanks!

[WTFH]

This thread, which you posted in, covers it quite well.

https://www.contractoruk.com/forums/...move-ir35.html

[lifexplorer]

This thread, which you posted in, covers it quite well.

https://www.contractoruk.com/forums/...move-ir35.html

Ah yes, I remember this thread. I actually responded to it... thanks for the reminder.

Since that thread though, when looking at the leasing option, I've gotten a impression that leasing costs for the limited company may not be offsettable against prior profits for corporation tax if you aren't actively trading (though I'm not 100% sure of this...and the thread suggests it's a grey area).

However, with a company car purchase, the entire cost would be taken while my company is trading, so figure it'd be a bit more reasonable from an expensing perspective... but it's also a big outlay in one go, so wanted to get some other views to see if I'm missing anything.

Thanks!

[WTFH]

Ah yes, I remember this thread. I actually responded to it... thanks for the reminder.

Since that thread though, when looking at the leasing option, I've gotten a impression that leasing costs for the limited company may not be offsettable against prior profits for corporation tax if you aren't actively trading (though I'm not 100% sure of this...and the thread suggests it's a grey area).

However, with a company car purchase, the entire cost would be taken while my company is trading, so figure it'd be a bit more reasonable from an expensing perspective... but it's also a big outlay in one go, so wanted to get some other views to see if I'm missing anything.

Thanks!

OK, firstly, it's not just about the cost, but also about the BIK.
Secondly, the vehicle will belong to the company and will need to be insured, etc correctly.
Thirdly, when you come to winding up the business, the car is not yours. It can be depreciated at fair market value over time, but you'd still have to buy it off the business if you wanted to keep it.

[WordIsBond]

but it's also a big outlay in one go, so wanted to get some other views to see if I'm missing anything.

Thanks!

Yes, that's very wise to get other views. I'd start with your accountant's view -- you're paying him for expert opinion. Asking a bunch of other contractors makes a lot of sense if it is something others have done or closely related to something they've done. This isn't like that.

My view is that a purchase solves some of the problems around leasing, that it clearly creates a BIK but BIK is not going to be an issue, and that I think you can do this and it sounds like a good move. That's my view but it's probably worth what you paid for it.

[WordIsBond]

OK, firstly, it's not just about the cost, but also about the BIK.
Secondly, the vehicle will belong to the company and will need to be insured, etc correctly.
Thirdly, when you come to winding up the business, the car is not yours. It can be depreciated at fair market value over time, but you'd still have to buy it off the business if you wanted to keep it.

He's clearly thought about #1 & 3, and #2 is a good point but hardly a problem, just something to be sure to handle correctly. I suppose the question of whether the insurance constitutes a BIK is something he'd want to discuss with his accountant.

[WTFH]

He's clearly thought about #1 & 3, and #2 is a good point but hardly a problem, just something to be sure to handle correctly. I suppose the question of whether the insurance constitutes a BIK is something he'd want to discuss with his accountant.

I would have thought that the insurance has to be personal, i.e. not paid by the company.

[WordIsBond]

Not sure why. My insurance was always paid by my employer back in perm days. I always assumed it was included in BIK calcs but to be honest I never did the maths to check.

So I suspect the company could pay it but it would have to be a BIK.

Probably cleanest if he paid the insurance personally.

[WTFH]

Not sure why. My insurance was always paid by my employer back in perm days. I always assumed it was included in BIK calcs but to be honest I never did the maths to check.

So I suspect the company could pay it but it would have to be a BIK.

Probably cleanest if he paid the insurance personally.

Yes, back in the day your employer paid, and most of your mileage was company mileage. Their policy would be business trips for the company that owned the car, and some personal.
Whereas this will be one company owns the car, it's not doing any business miles for that company, but it is doing full business use for another company as well as personal.
I suspect that the insurers will make it difficult (or just expensive)

[Lance]

I think it's a lot simpler.....

Your title is "purchasing a company car... but not sure on future trading"
My immediate to that is 'don't do it then'.

Why would you want to commit to a long(ish) term lease when the future of your business is not certain.
Forget the rest of it.

If you NEED a new(er) car then buy one for cash that you own personally.
See again in 2 years.