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Company Car Tax - between companies

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    Company Car Tax - between companies

    If I became a contractor and wanted to keep my existing company car, would their be tax payable?

    I'm looking at creating a UK Ltd that will invoice the company I'm working for (my employer). If my employer gives my UK Ltd a car to use is there BIK tax due? How would this work? Does a anyone have experience of this?

    Thanks

    #2
    So, there's a car provided to yourco, by yourclientco, which is provided by yourco for your use?

    That's definitely a benefit, so I'd expect you to have to pay tax on it.
    ‎"See, you think I give a tulip. Wrong. In fact, while you talk, I'm thinking; How can I give less of a tulip? That's why I look interested."

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      #3
      Originally posted by dmh View Post
      If I became a contractor and wanted to keep my existing company car, would their be tax payable?

      I'm looking at creating a UK Ltd that will invoice the company I'm working for (my employer). If my employer gives my UK Ltd a car to use is there BIK tax due? How would this work? Does a anyone have experience of this?

      Thanks
      If your limited company provides you personally with a company car, it is a BIK.

      Not sure why you want to start your own limited company and buy a car from your current employer anyway. Reading between the lines here, but are you thinking of working with your current employer as a contractor? If so, cars and BIK are the least of your worries - read up on IR35.
      Contracting: more of the money, less of the sh1t

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        #4
        Sorry maybe I wasn't clear.

        My client will / has the car on lease already. They will be providing it to me and paying for all the fuel (inc. private miles). As they will be providing it to essentially my company is there any BIK?

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          #5
          Originally posted by kingcook View Post
          If your limited company provides you personally with a company car, it is a BIK.

          Not sure why you want to start your own limited company and buy a car from your current employer anyway. Reading between the lines here, but are you thinking of working with your current employer as a contractor? If so, cars and BIK are the least of your worries - read up on IR35.
          I'm not sure if I will fall under the IR35 issue. I'm basically going to continue employment for my current company however the reason for going ltd is because I'm about to take over a small business that will be t/o c. £350 with EBIT of £35k. As I already pay higher rate under my current employment I thought best not to take this on as a sole trader as it will, I think, be taxable at a full 40%. So whilst taking this company ltd I thought I could utilise this and move my current earnings under this new ltd too. Removing my current 40% tax burden and associated BIK.

          Hope that makes sense, do you think I will be ok or do I need to worry about IR35

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            #6
            Originally posted by dmh View Post
            I'm not sure if I will fall under the IR35 issue. I'm basically going to continue employment for my current company however the reason for going ltd is because I'm about to take over a small business that will be t/o c. £350 with EBIT of £35k. As I already pay higher rate under my current employment I thought best not to take this on as a sole trader as it will, I think, be taxable at a full 40%. So whilst taking this company ltd I thought I could utilise this and move my current earnings under this new ltd too. Removing my current 40% tax burden and associated BIK.

            Hope that makes sense, do you think I will be ok or do I need to worry about IR35
            Yes, you do need to worry about IR35 especially if your new client previously engaged you as an employer on PAYE. Check out the Business Entity Test and see how you score.

            If you are taking on the running of a bonafide company with multiple employees and clients then you might get away with it. It's vital that you get some professional advice from an accountant on this (and probably a lot of other matters relating to the new company) because your tax position is going to be complex.

            If you get a company car for private use then there will always be a BIK. Getting a car "given" to you for "free" always looks attractive but the hidden cost is that you pay tax on the BIK. Unless you are getting a Prius or some ultra efficient low emissions car, my gut feeling is that you should dump the company car when you resign, buy one privately and claim the 45p/25p per mile because it's the simplest way to do it and probably costs about the same in the long run.
            Free advice and opinions - refunds are available if you are not 100% satisfied.

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              #7
              Hmmm thanks for your advice, lots to think about.

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                #8
                Originally posted by dmh View Post
                I'm basically going to continue employment for my current company however the reason for going ltd is because I'm about to take over a small business
                Could you clarify this bit?

                Are you saying you're going to remain in employment with your current employer, and have a totally seperate business on the side?

                Or are you resigning from your current employment and then doing contract work for them as one of your clients?
                Contracting: more of the money, less of the sh1t

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                  #9
                  Originally posted by kingcook View Post
                  Could you clarify this bit?

                  Are you saying you're going to remain in employment with your current employer, and have a totally seperate business on the side?

                  Or are you resigning from your current employment and then doing contract work for them as one of your clients?
                  I will be : remaining in employment with my current employer, and have a totally seperate business on the side

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                    #10
                    Originally posted by dmh View Post
                    I will be : remaining in employment with my current employer, and have a totally seperate business on the side
                    I would imagine your existing employer would not be happy you using the company car for business other than their own. Are you sure your contract allows you to do other work? I have seen contracts that don't allow two jobs let alone in the same field with possible conflicts of interest.
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