go green - cheap bmw with 100% capital allowance?

[adder]

idea - buy a 118d with 119g of CO2 emmissions and get 100% capital allowance
so if u have a 'spare £20k' (ie taken expenses and divis up to lower earnings limit) which you'd otherwise have to pay CGT + income tax on when taking as a divi, u are effectively saving about 40%!
I am right in thinking that you don't pay any company tax on this 'asset' in subsequent years too?
AND you're doing your bit for a greener world!
Thoughts?
(edit to take bmw out of title for fear of alienating...)

[dude69]

idea - buy a 118d with 119g of CO2 emmissions and get 100% capital allowance
so if u have a 'spare £20k' (ie taken expenses and divis up to lower earnings limit) which you'd otherwise have to pay CGT + income tax on when taking as a divi, u are effectively saving about 40%!
I am right in thinking that you don't pay any company tax on this 'asset' in subsequent years too?
AND you're doing your bit for a greener world!
Thoughts?

Hmm, a ratty hatchback? No thanks

But seriously though, it looks attractive from a tax point of view, assuming you do want a new ratty hatchback. Currently the BIK is 18% for that car, but falls to 10% from April, which is obviously well below the 20% CT.

List price is £18,820 for the poverty spec (for a ratty hatchback!), so £1,882 BIK, which is £752.80/year in tax.

Assuming value of £6,820 after 5 years, then:

Buying it yourself out of 40% taxed income - £18,820 / 0.6 = £31,366 of pre-tax income year 1
Then year 5, you have £6,820 from sale of car

Cf.
Buying it through company:
Year 1 with £31,366 of profits: £18,820 paid out of expenses
£12,546 left over = £7,527.60 distributed as dividend after tax
Each year £752.80 paid in personal tax
Year 5: car sold - company profits increased by £6,820, but only 60% receivable to you after tax = £4,090 pay out.

So at year 5, you have:

Buying it yourself £6,820
Buying it through company, assuming 4% net interest on money: £5,081 from Year 1 dividend - 5 year's tax + £4,090 profit = £9,171

So the saving is £2,300 over 5 years

The TCO of buying it through the company based on net income otherwise receiveable based on full 40% tax paid, excluding overpriced servicing, petrol, and insurance, is £18,820 - £9,171 = £9,650

So you have paid £10k to own the car for 5 years

So while you have saved money, assuming you want that car (and note I have assumed full 40% tax payable in all cases), you've still paid £10k for ownership.

So I'd rather buy a nicer used car for the same money, e.g., http://www.cargiant.co.uk/cars/detail.asp?Id=350982

But yes, the 10% BIK and 100% capital allowance are helpful, and mean that it now makes sense, assuming you (a) want a new car, and (b) want a ratty little one, to buy through the company. The real money saving is still to buy used.

Just a note - it only works because of 10% BIK: 18% is not low enough, you'd pay an extra £600/year = £3k over 5 years on 18% BIK

[adder]

dude, let's remain objective! I wouldn't have that VW banger on my drive...
let's say I can get an M Sport new for £20k and it's worth £12k after 3 years, can you redo the figures for me please???

[DiscoStu]

So I'd rather buy a nicer used car for the same money, e.g., http://www.cargiant.co.uk/cars/detail.asp?Id=350982

Are you Milan in disguise?

[Bear]

So I'd rather buy a nicer used car for the same money, e.g., http://www.cargiant.co.uk/cars/detail.asp?Id=350982

[adder]

you've still paid £10k for ownership.

Dude, I appreciate your effort with the figures but this is nowhere near methinks....
Look, MYCO has £20K
option a - buy the bimmer
option b - take the £12k cash, buy the passat taxi, buy breakdown cover, buy an iphone (to phone the AA), buy booze, new clothes and a few loose women (cos we can't pull them in a passat)....
Now over 3 years we each do 10k miles, you make £3k/year (diff between 40p and 10p/mile)
Yes I have a BIK to pay but that is offset by your insurance costs, servicing, higher fuel consumption etc etc
You 'make' £9k over 3 years but your taxi is only worth £3k at this stage and the bimmer is worth £12k, a difference of £9k!!! wey hey!!! U convinced yet?

[Ruprect]

Most of that flew over my head. Can anyone make it simpler? I wouldn't mind a new car...

[Hiram King Of Tyre]

If you have a company car (Or van/pickup), does that preclude you from still using a private car and claiming 40p/25p?

[FiveTimes]

Dude, I appreciate your effort with the figures but this is nowhere near methinks....
option b - take the £12k cash, buy the passat taxi, buy breakdown cover, buy an iphone (to phone the AA), buy booze, new clothes and a few loose women (cos we can't pull them in a passat)....

Dude, I think you are deluded if you think a 118d is going to help you impress the women...

[adder]

Dude, I think you are deluded if you think a 118d is going to help you impress the women...

i never said that, i said you *definitely* wouldn't in a passat ;-)
maybe you don't understand trends and fashion, but minis, 1 series et al hold their value very well cos young birds love em!
Anyway, mucho respect if u do it FiveTimes a night

Hiram, remember u can still claim 13p/10p a mile in a company car for petrol/diesel.....
Would be interested in an accountant giving a defo answer to this question though...
ACCOUNTANTS where are u!!???