Switching car lease payments from business to personal

[MattBCL]

Hi. Question on lease cars if anyone has any knowledge?

Background is:

• Ltd co trading for 20 years, 2 directors: self and wife
• Had enough of staring at a screen etc, so looking to retire early (55).
• Have 2 x lease cars with about 2 years payments remaining on each. Both are with separate lease companies. I reclaim the VAT back on each (10%).
• Cash in the Ltd to cover the next few months payments on the cars only - no other income or outgoings
• I want to close the company / make dormant to simplify my tax affairs and transfer the lease payments to come from my personal bank account instead (I accept I'd lose the VAT reclaim in doing so).

My question is: if I approach both lease companies and explain the above, it's likely they'll want to create a new agreement (at a cost) or will reject it outright as I'd be moving from a business to a personal lease arrangement. So I'm wondering whether I could just contact them and update my bank details so the payments come from my personal account - and say nothing else. They still get paid / everyone's happy etc. Is this likely to work, or cause me problems?

Ultimately, I just want rid of the Ltd co now, but want to keep the two car leases intact. The default answer is just to keep the Ltd co running and prop it up with personal payments to cover the 2 cars, but I'd really like to avoid the annual pain of company returns / P11Ds etc etc and just keep it simple.

BTW I intended to work at least as long as the leases ran, but a long-term work opportunity dried up due to IR35 concerns within my public sector client / the pension did better than I'd planned - hence I find myself now in this position.

[WTFH]

The answer is "it depends"
It depends on who the leasing company is - do they do both personal and business leasing?
It depends on how long into the lease you are - if you're less than half way through the contract, then you probably want to keep it going for longer.

As for how much extra you'd be paying, it's not just the 10%. You might want to look at the differences.
I'm sure several on here will tell you to switch to your personal bank account and hope they don't notice, which would put you in breach of contract.

I'd suggest handing the keys in and walking away, then starting again, financing the next car(s) through personal finance routes. If you've been contracting for 20 years, you should have a healthy enough warchest built up to make the process to the normal person world a little less painful.

[MattBCL]

Thanks WTFH. Not sure I could just walk away though - I've signed a contract for 3 years on each and I'm just a year in. I could fold the Ltd and play hard-ball but I've paid a lot up-front on the leases, and it doesn't feel right to do that (plus, I like the cars and want to keep them).

I did wonder whether to just change the bank details as I outlined, or even, just fold the Ltd and leave the company bank account running (don't tell the bank) and feed it enough to cover the payments. That way I offload the hassle of the Ltd co but don't have to bother the leasing companies with a change of bank details. The only problem is if I am asked to re-attest to the bank that my company remains open (to justify my business account), though they've never asked me to do so in the 20 years I've been with them so far, so not sure why they'd ask unless they do a reconciliation against Companies House.

The default (easy) option of leaving the Ltd trading for another 2 years - merely to service the lease payments on the cars - feels wrong to me though. I've effectively stopped trading and I worry the setup could be construed as a tax avoidance scam. I've asked my accountant what he would do and will report back.

Any other ideas (anyone) gladly received...

[malvolio]

Thanks WTFH. Not sure I could just walk away though - I've signed a contract for 3 years on each and I'm just a year in. I could fold the Ltd and play hard-ball but I've paid a lot up-front on the leases, and it doesn't feel right to do that (plus, I like the cars and want to keep them).

I did wonder whether to just change the bank details as I outlined, or even, just fold the Ltd and leave the company bank account running (don't tell the bank) and feed it enough to cover the payments. That way I offload the hassle of the Ltd co but don't have to bother the leasing companies with a change of bank details. The only problem is if I am asked to re-attest to the bank that my company remains open (to justify my business account), though they've never asked me to do so in the 20 years I've been with them so far, so not sure why they'd ask unless they do a reconciliation against Companies House.

The default (easy) option of leaving the Ltd trading for another 2 years - merely to service the lease payments on the cars - feels wrong to me though. I've effectively stopped trading and I worry the setup could be construed as a tax avoidance scam. I've asked my accountant what he would do and will report back.

Any other ideas (anyone) gladly received...

It's a minor detail, but significant when planning what to do the lease is nothing to do with you, it belongs to the company of which you are an officer. AIUI (and may be wrong but will no doubt be corrected!) here's nothing wrong with using your taxed income to keep the company's payments afloat, basically as a director's loan perhaps, but not with simply transferring the payments from a company account to a personal one. They operate under different regimes, and the bank(s) would not be happy.

Are you sure you can't simply buy the cars off the leasing company for the outstanding balance in interest plus the cars' residual value?

[MattBCL]

Thanks Malvolio. I guess I can ask them what the options are, but I risk flagging myself up to them in some way and putting myself on their radar if I opt for one of my other (ahem..) approaches. That said, I don't want to be fretting for 2 years about being 'found out' by the leasing companies for doing something wrong, so will probably need to explore those options.

I'll report back if I get anywhere with them.

[courtg9000]

It is unlikely they will allow you to switch as this would be a headache for most leasing finance firms.

Their Structures usually work as follows: (certainly most manufacturers finance arms in the UK)

Leasing TopCo
Personal LeasingCo
Business LeasingCo
TuftyClubLeasingCo
etc etc

Thus they would have to transfer the lease between subsiduaries. Too much hassle.
My advice feed the company the dosh for 2 years and do the paperwork.
If you have signed a "directors declaration" or similar or their is a clause in the lease to recover outstanding monies from the director you could possibly see your credit rating effected thus limiting the chances of getting personal credit on new leases.
Its unlikely that based on my structure above that Business Leasing Co would sell you the vehicles privately.
Leasing company would probably go bonkers about a change of payments from a personal account as it would cause massive issues with the structure outlined above.

[WTFH]

Are you sure you can't simply buy the cars off the leasing company for the outstanding balance in interest plus the cars' residual value?

If the lease is in the company name, then the company might be able to pay the outstanding balance plus residual value, and then he could buy them off the company at FMV.
But I doubt the leasing co would be interested in selling the cars to him as an individual when they are only 1 year into a lease.

[northernladuk]

The contract for the cars is between them and your LTD. If you fold the LTD you'll be in breach and there is no entity for the lease company to go after if something goes wrong so I don't think just switching to personal payments is a good way to go. Just guessing here using the basic chain of agreement.

I am sure we had a thread where a lease swapped it from the company as they keep getting money in but as mentioned it will depend on how many people are in the chain and how many agreements are in place.

[Maslins]

You won't be able to "fold" the company whilst keeping the company bank account open. Trying to do that would just lead to whatever cash was in the company bank account being lost to the crown ("bona vacantia"), then any ongoing DD payments to the lease provider bouncing.

From a practical perspective you could just swap the payments to come from a personal account, then close the company. Like you say, maybe the leasing company won't care as long as they get their money each month. But they'll likely find out about the company being dissolved, and it could cause issues.

I think contacting the leasing company to ask re a transfer to personal is the sensible option.