Car and medical insurance

[THEPUMA]

Ah right ok I see. I forgot to multiply by 20% or add NI!

So as I've already maxed my divis this year that means tax and NI would be about £1300. Going to be zero running costs in first 3 months (unless insurance is one) and zero business miles (I take the train). So company would have to save about £1300 to break even (ignoring any taxes getting money out of company). Which means loss to company must be about £6k (i.e sell car for £28K).

With all the extra paperwork and potential for hassle with HMRC later (plus that I was told company insurance is more expensive than personal car insurance). I'd need to sell the car for much less that £28K to make it worth while, say about £22K. I couldn't honestly justify a 35% depreciation in car value after 3 months.

But I always enjoy finding out how these things work

I don't think your calculation above takes account of the tax saving on the £4K lower dividend you would need to take to finance the acquisition of the car but you are still probably correct that the tax saving isn't worth the hassle based on these particular circumstances.

[chrisl]

Just out of interest, why does a BIK only arise on a claim.
Will the cost of the insurance in the first place not be a BIK on the director if the company pays for it? I dont know the rules!

1) I did. There wasn't a lot in it when it was all added up because i would have had to increase my dividend to afford it. And, of course, I didn't want to own a depreciating asset. My accountant told me that, if it's your company, there's not a lot of difference financially and that it was only disadvantageous if you're an employee.

Also, some people say low mileage - through the business, high mileage, go personal and claim the mileage.

2) I believe the insurance payments fir you can go through the business but, if there are claims, the amount of the claim is a BIK. Wife and child I can't see as anything other than a BIK.

But then, IANAA, so if you haven't got one get one, and ask them...

[ratewhore]

Just out of interest, why does a BIK only arise on a claim.
Will the cost of the insurance in the first place not be a BIK on the director if the company pays for it? I dont know the rules!

Dunno. That was my understanding and I can't remember where from.

Check with your accountant.

[css_jay99]

If buy a company car (e.g. 2005 plate Astra for £3500),

As long as mileage is company use/any fuel payments is company use (i have my personal car), would I need to pay any additional personal tax?


cheers

css_jay99

[THEPUMA]

If buy a company car (e.g. 2005 plate Astra for £3500),

As long as mileage is company use/any fuel payments is company use (i have my personal car), would I need to pay any additional personal tax?


cheers

css_jay99

If use were 100% business use, it could still be a taxable benefit-in-kind if AVAILABLE for private use. In order to avoid this problem, we have managed to get HMRC to accept that there is no BIK if the car is only insured for business journeys.

PUMA

[css_jay99]

we have managed to get HMRC to accept that there is no BIK if the car is only insured for business journeys.
PUMA

how did you do that?. I was planning to buy and use for Business use only


cheers

css_jay99

[THEPUMA]

how did you do that?. I was planning to buy and use for Business use only


cheers

css_jay99

We wrote to them, explained the circumstances and asked them to agree that it was OK, which they did.

[DonaldG]

This link gives a useful calculator of much car benefit you would pay:-

http://www.hmrc.gov.uk/calcs/cars.htm

The general rule it is better not to have the car in the company, unless it has very low CO2 emissions or you are doing a low business mileage and a high personal mileage.

Buying the car new through the company and then selling it to yourself doesn't really work, unless there is a dramatic fall in value (you have to use a realistic market vaue - the Revenue are not that gullible), plus presumably you will have to buy the car by way of dividend - which may take you into higher rate.

Remember if it is your personal car you can claim 40p a mile for the first 10,000 and 25p a mile thereafter. If you are doing a reasonable business mileage then this can repay some of your running costs.

[THEPUMA]

Buying the car new through the company and then selling it to yourself doesn't really work, unless there is a dramatic fall in value (you have to use a realistic market vaue - the Revenue are not that gullible), plus presumably you will have to buy the car by way of dividend - which may take you into higher rate.

I must confess I am not particularly familiar with the Scottish car market but down here in England values tend to fall considerably when the car is driven off the forecourt.

Your second point re buying the car by way of dividend is also nonsense. The value is lower, therefore you are paying less by way of dividend and incurring less higher rate tax.

[css_jay99]

We wrote to them, explained the circumstances and asked them to agree that it was OK, which they did.

cheers,

is the business only insurance part the key point mentioned to HMRC or can i leave that out?