Private Car Purchase

[westlander]

Hi All,

I have searched the forums but couldn't find anything on purchasing a vehicle for business use. Lots on company cars and as a result that is not something I wish to proceed with!

I'm currently clocking up 400 miles a week and my 10 yr old car has 180,000 miles on it so I need to look at renewing the car (not wanting to tempt fate). Is there any advantage of purchasing a car through my Ltd Co. account?

If so what is the best way to go about doing this, by this I mean does the purchase have to come out of the business account, or can i just pay for a car and keep the receipt for the end of year accounts?

Thanks
Steve

[malvolio]

Hi All,

I have searched the forums but couldn't find anything on purchasing a vehicle for business use. Lots on company cars and as a result that is not something I wish to proceed with!

I'm currently clocking up 400 miles a week and my 10 yr old car has 180,000 miles on it so I need to look at renewing the car (not wanting to tempt fate). Is there any advantage of purchasing a car through my Ltd Co. account?

If so what is the best way to go about doing this, by this I mean does the purchase have to come out of the business account, or can i just pay for a car and keep the receipt for the end of year accounts?

Thanks
Steve

YourCo can buy a company car through the company and then you pay the necessary BIK on it for personal use, or you can buy your own car and charge the company 45p a mile for business use. End of. You can only avoid the BIK if you have access to a vehicle that you don't use for personal business, incuding getting home. I suspect that isn't really an option.

As for funding it, YourCo can't pay your bils any more than Tesco can. So you need to find the money from your own income. £180 effectively tax free expenses a week will go a fair way towards paying off loan or lease costs after all.

Finally if you haven't yet worked out that You and YourCo are two completely separate things, each with their own money and tax liabilities, you're probably doing other things wrong...

[BolshieBastard]

Hi All,

I have searched the forums but couldn't find anything on purchasing a vehicle for business use. Lots on company cars and as a result that is not something I wish to proceed with!

I'm currently clocking up 400 miles a week and my 10 yr old car has 180,000 miles on it so I need to look at renewing the car (not wanting to tempt fate). Is there any advantage of purchasing a car through my Ltd Co. account?

If so what is the best way to go about doing this, by this I mean does the purchase have to come out of the business account, or can i just pay for a car and keep the receipt for the end of year accounts?

Thanks
Steve

There's plenty of advice on here about car purchase.

However, DONT buy a car through the business. You get taxed as a company and taxed as an employee of your company so, effectively, you get taxed twice on the purchase and owning the car. A company car only tends to make sense for a large company where you are the employee as the company which has no connection to you pays its part and you pay yours.

Some people claim that buying an electric vehicle through a small ltd company is tax efficient but, since these vehicles only have a range of about 100 miles between charges, they dont tend to fit the need for a contractor.

It is far better to buy personally on a PCP, HP or loan then claim mileage at 45p pm for the first 10k then 25p pm until the start of the new tax year.

Be aware if you hand any car back before being half way through the repayment period, this is classed as a default and if you work in the financial sector (banking) could affect your future chances of getting contracts when they credit reference you.

[Wanderer]

I have searched the forums but couldn't find anything on purchasing a vehicle for business use. Lots on company cars and as a result that is not something I wish to proceed with!

Depends on how you want to use the car. If it's not exclusively for business use then you have to pay tax on the BIK as a company car and that's the way that most people would be forced to do it. Generally they don't bother because it's much simpler and probably just as easy and tax efficient to claim the 45/20p per mile (about £6,400 per year for your mileage).

In your case and presuming that your commuting to work is indeed an allowable travelling expense within the 24 month rule it may be feasible that you could justify having a second car exclusively for business. In this case you may be able to buy the car through the company, register/insure it in the company name and the company can pay for all the running costs which will deducted from the company's profits.

But let's not kid about here. Having one car and claiming it's exclusively for business while secretly using it for a bit of private use isn't going to wash with HMRC. They will almost certainly reject that and hit you with a huge tax bill, plus interest and penalties if you try to pull the wool over their eyes. Having a business vehicle will mean keeping a log book of your business mileage to prove it was only for business use. Falsifying the log book will get you into even deeper trouble.

Don't forget that although you and the business are different legal entities, any cost to the business reduces the profitability of the business at the end of it all and that's less money in your pocket. Most likely, you are best off getting a fuel efficient car and claiming the mileage allowance - keeps it all simple.

HMRC's guidance is here HM Revenue & Customs: Company cars - guidance for employees

There are special concessions for a company "van" including some car derived vans which may allow private use but be aware that there are special speed limits on single/dual carriageways for commercial vehicles if they have a maximum laden weight of over 2,000 kg and the police/cameras do enforce this so be aware if you like to make good progress. Having a vans which may be heavier on fuel consumption than a car means it could cost you more money in the long run.

Bottom line? Keep it simple, buy a fuel efficient car yourself and just claim the mileage. If you want to go some other way then discuss it in detail with your accountant though they will probably just tell you what I just said there because they want a quiet life too.....

[Jessica@WhiteFieldTax]

Further to wanderer's thoughts.

Establishing non business use is very difficult to do definitively. You may find an accountant nods it through for you, but it become a difficult when / if HMRC do an inspection of any sort.

There was a tribunal case on this (sorry, haven't got the citation), it went something like:

Judge: Did you buy the car for business use
Director: yes
Judge: And no intention of private use
Director: No
Judge: Do you have another car at home
Director: Yes
Judge: If you had to rush your child to hospital and your other can wouldn't start, wood you use the business car
Director: In an emergency, yes
Judge: then it's not brought for business use

And so tax man won case.

So when your accountant says "no, you can't", its not (always) out of bloody mindedness...

[BolshieBastard]

Further to wanderer's thoughts.

Establishing non business use is very difficult to do definitively. You may find an accountant nods it through for you, but it become a difficult when / if HMRC do an inspection of any sort.

There was a tribunal case on this (sorry, haven't got the citation), it went something like:

Judge: Did you buy the car for business use
Director: yes
Judge: And no intention of private use
Director: No
Judge: Do you have another car at home
Director: Yes
Judge: If you had to rush your child to hospital and your other can wouldn't start, wood you use the business car
Director: In an emergency, yes
Judge: then it's not brought for business use

And so tax man won case.

So when your accountant says "no, you can't", its not (always) out of bloody mindedness...

So if an employer has a company car and someone on the premises has an accident, if the employer phones for an ambulance but is told there's a 4 hour wait, decides instead to use company car to transport said someone to the hossie as its an emergency, the car is no longer deemed a company car?

[eek]

So if an employer has a company car and someone on the premises has an accident, if the employer phones for an ambulance but is told there's a 4 hour wait, decides instead to use company car to transport said someone to the hossie as its an emergency, the car is no longer deemed a company car?

The employee is on company premises where the car lives. Then it can be used to take the employee or visitor to the hospital.

Group company cars have to live overnight at the office. if people regularly take them home they have to pay BIK on them.

[Wanderer]

Judge: If you had to rush your child to hospital and your other can wouldn't start, wood you use the business car
Director: In an emergency, yes
Judge: then it's not brought for business use

And so tax man won case.

Following on from what BolshieBastard says, the answer should be like this:

Director: So, if I were in a tax tribunal and an HMRC inspector had an unfortunate accident and fell down the stairs sustaining a serious injury and there was no ambulance available, would I be allowed to take the inspector to hospital?

[BolshieBastard]

The employee is on company premises where the car lives. Then it can be used to take the employee or visitor to the hospital.

Group company cars have to live overnight at the office. if people regularly take them home they have to pay BIK on them.

In that case, they need to increase the BIK on company vans considerably.

Im sick of moving to new builds then in 3 or 4 years, seeing neighbouring houses bought by grunts and neanderthals with 'white van' who then clutter up the cul de sac with the fracking things.

Lowers the tone (not to mention property price) of the area

[Old Greg]

Following on from what BolshieBastard says, the answer should be like this:

Director: So, if I were in a tax tribunal and an HMRC inspector had an unfortunate accident and fell down the stairs sustaining a serious injury and there was no ambulance available, would I be allowed to take the inspector to hospital?

You'd want to do that inverted commas thing with your fingers before 'fell down the stairs'.