Car Leasing as a contractor

[SAPBoy]

Hi Folks, I am a contractor running as a Ltd Comp. If I were to lease purchase a new car would I beable to claim any tax back on the payments? Any guidance appreciated. Tx

[malvolio]

Wouldn't think so, other than the VAT of course. Quite the reverse, in fact - you would have to pay them personal tax on the benefit in kind. There's plenty of (very confusing!!) info on that somewhere in the depths of the Hector website at www.hmrc.gov.uk

Been doing this LtdCo-thing very long, have you? Wonder what else you don't know about...

[SAPBoy]

Sorry, I didn't mean buying through the company and having it as a 'company car', I meant was there any of the lease (rental) costs that I could offset against the business? Thanks for the info anyway.

[malvolio]

It's a business expense like any other. But you'd still get stuck with the BIK costs on your own tax, unless it's a commercial van (and only then under certain restrictions) - how it's funded doesn't matter, it is still available for your use.

[tim522004@yahoo.co.uk]

The most tax efficient way to operate a car is by purchasing/leasing the car through your own name. You can recharge the milegae at 40p per mile for the first 10,000 miles, then 25p thereafter. You will avoid any benefits in kind and the mileage claim is paid free of tax.

You can claim back VAT on the fuel element of the mileage claim, normally around 3p per mile. Customs have issued exact figires based on cc of car on their website. You can back date the claim aswell if you have missed this previously. Becuase you are claiming business miles you don't have to add back a VAT scale charges on your VAT return.

The mileage claim is normally sufficient to offset the cost of the lease, ie. cost of lease, say £500 and the mileage claim won't take much to get upto £500.

As regards a record of mileage it's best to keep a diary as follows;

Date Place of destination Miles Pence per mile Total VAT NET


Then total this up every month and then draw a cheque payable to yourself personally every month.

If you have your own Ltd company then makesure the registered office is at your home, then you can claim mileage the moment you leave your house for work, as this will now be a place of business.
If anybody mentions that this can effect the tax free statue of your home, they are talking rubbish. The reality is that any element of your home deemed for business use will be covered by the reliefs allowed under CGT.

Hope this helps

[VectraMan]

If you have your own Ltd company then makesure the registered office is at your home, then you can claim mileage the moment you leave your house for work, as this will now be a place of business.

That can't be true surely? My Co's registered office is the company formation agent I used who are miles away. If I counted mileage from my registered office I'd be claiming about 10x more than I actually travel (nice for me, but it can't be legal).

[malvolio]

It does, but you miss the point. If the OP is unclear on the basics (as evidenced by his original question), we do more good by making him at least go and dig around for the answer, since that way he is likely to discover all the other things he doesn't know about which we can't help with becasue we don't know what he doesn't know.

That might seem harsh but there's been a sort of running campaign on the technical fora here to make people who want to be contractors think for themselves and come back when they genuinely don't understand or can't find out (which given the HMRC website, for instance, is not surprising!)

So your reply, which is admirably concise and accurate (and which I could also have provided almost verbatim), has only served to make him go away happy in the knowledge he knows how to run his business, which I suspect he doesn't. (also see the reply above - there's more evidence...)

Darwinism is alive and well in Contractor world. You protect the weak and inefficient at the expense of the population. Geddit?

(BTW - what's a tax free statue? Can we all have one? )

[ASB]

The most tax efficient way to operate a car is by purchasing/leasing the car through your own name. You can recharge the milegae at 40p per mile for the first 10,000 miles, then 25p thereafter. You will avoid any benefits in kind and the mileage claim is paid free of tax.

Generally, but not always. Depending upon the CT bands of yourco and your individual marginal rate it can be more effective to claim the mileage at 0p. for 10,000 miles this would increase the company profit by 4k - giving rise to a likely 800 additional CT payable. However as a 40% taxpayer one could still claim the 4,000 cost of those 10,000 miles reducing personal taxation by 1,600.

Your point about claiming from home door is also potentially erroneous. Generally it will be true but not after 24 months iof clients in the same area. Exception of course is if home remains the major place of work (normally > 60%)

[tim522004@yahoo.co.uk]

I think everyone is missing the point.

The question was what is the best way to purchase a vehicle for business.

If you are paying for the lease on a car then you want the money to pay for lease, say £500 per month. If you don't take the money out for the lease (via a mileage claim) then you will be £500 per month out of pocket. Are you suggesting that you take this out as a dividend (certainly not a salary as that would expensive). The dividend would then be taxable at 40%, which you are then reducing by your mileage claim on your tax return because your company did'nt pay you the 40p per mile. I think if you do the math this doesn't work. Is everyone seriously suggesting that it is tax efficient to have a company car, not only do you have the tax on the benefits in kind you will also have to pay VAT scale charges every VAT QTR and Class 1a NI on the benefit in kind @ 12.9%.

As regards the registered office comment, I suggest that you check some tax case law. I think you will find this is correct.

As regards the comment about the company formation agents, you haven't got an office there. I presume most contractors will do some work from home, even if it is making business phonecalls. If your home is your registered office then it is a businss address, therefore you can claim mileage when you go and see a client.

It's not my place to convince people, I'm just providing info. Why don't you check your case law or speak to your accountant! Do you think I'm making this up for fun?

[boredsenseless]

The question was what is the best way to purchase a vehicle for business.

If you are paying for the lease on a car then you want the money to pay for lease, say £500 per month. If you don't take the money out for the lease (via a mileage claim) then you will be £500 per month out of pocket. Are you suggesting that you take this out as a dividend (certainly not a salary as that would expensive). The dividend would then be taxable at 40%, which you are then reducing by your mileage claim on your tax return because your company did'nt pay you the 40p per mile. I think if you do the math this doesn't work. Is everyone seriously suggesting that it is tax efficient to have a company car, not only do you have the tax on the benefits in kind you will also have to pay VAT scale charges every VAT QTR and Class 1a NI on the benefit in kind @ 12.9%.

As regards the registered office comment, I suggest that you check some tax case law. I think you will find this is correct.

As regards the comment about the company formation agents, you haven't got an office there. I presume most contractors will do some work from home, even if it is making business phonecalls. If your home is your registered office then it is a businss address, therefore you can claim mileage when you go and see a client.

It's not my place to convince people, I'm just providing info. Why don't you check your case law or speak to your accountant! Do you think I'm making this up for fun?

He's right on the business address thing...

The actual official way of working out a mileage claim is ...

The distance in miles from your office to the client site, or from your home to the client site (whichever is the smaller).

The reason for opting to have your office as your home address is that you technically have to deduct the amount of miles you would have travelled to get to work normally from the claim.

i.e. Boredtown to London is 90 miles

however if my office was in Wimbledon which is 75 miles away I should really only claim 15 miles, since this is the only part of the expense incurred that I would not have incurred normally anyway.

I'm sure there are some flaws in the above but the basics are correct