Reply to: Use limited company to purchase car and lease-back to me?

[DaveB]

Looks more or less ok except the depreciation which isn't allowable against tax. You get capital allowances instead which can anything from 100% write off down to 8%.

You also need to remember class 1a NIC in the BIK. That's 13.8%.

Cheers Alan, The BIK number came from HMRC's own calculator so I assumed that NI was included in the figure.

[Alan @ BroomeAffinity]

Looks more or less ok except the depreciation which isn't allowable against tax. You get capital allowances instead which can anything from 100% write off down to 8%.

You also need to remember class 1a NIC in the BIK. That's 13.8%.

[DaveB]

We hosted a webinar yesterday regarding the dividend changes and the question about company cars came up a couple of times. With the carbon efficient cars on the market becoming increasingly worth driving, company cars could become relevant again.

Just out of interest Alan, did I get anything majorly wrong with the figures above?

I realise it's a specific scenario but if you have cash in the business and taking a dividend to buy a car would put you into the higher rate bracket, it seems like a better way to go about it.

[Alan @ BroomeAffinity]

We hosted a webinar yesterday regarding the dividend changes and the question about company cars came up a couple of times. With the carbon efficient cars on the market becoming increasingly worth driving, company cars could become relevant again.

[DaveB]

Looking at this in light of the dividend tax changes it may actually be worth purchasing as a company asset rather than a personal purchase from next year.

In the usual scenarios of taking salary and divi up to the tax threshold we will be paying ~£2000 more in tax due to the dividend tax. Above that and you start paying 32.5% of everything you take.

If you want to buy the car out right from personal cash then you would have to take an extra divi on top which puts you into the higher rate tax bracket.

For a £30,000 divi that works out at an extra £8,000 in tax before you've even bought the car. You'd actually have to pay a divi of £43,000 to have the £30,000 left after tax to buy the car.

Buy the same car as a company asset, and for personal use you would pay £1740 pa in BIK on the car. Over 3 years thats £5220 in extra tax. If you took the dividend you'd have paid £13,000

On top of that you set the cost of the car against CT at 20%, worth £6000. You set the depreciation of the car against CT over three years. Straight line depreciation over 3 years would be £10,000 pa giving £2,000 pa offset against CT.

Sell the car after 3 years, money goes back into the company. Rinse and repeat.

You pay less tax personally and the company pays less CT.

[mudskipper]

Errr, so, if my company leased an outlander phev, and if my journey was 35 miles each way, I could charge 16p per mile, for 20 miles (on electric), then 40p per mile for 15 miles? Or charge them both for 35 miles?

I'm quite tempted by the car. My divs take me into 40% and I pay a car loan of £300 (3yrs) for a standard people carrier.

Why is there not an orderly queue forming? This vehicle looks to tip the balance back to company leasing?

No, you claim the company car rate. 40p would be having your cake and eating it.

https://www.gov.uk/government/public...m-1-march-2016

[ChadGates]

have you considered an electric vehicle?
something like the Outlander PHEV?
5% BIK, £0 road tax & if you pay for the fuel out of your own pocket you could claim the advisory fuel rates of 16p per mile from your company (this may change soon with the petrol prices tumbling). HMRC dont distinguish the difference in Hybrid, so as it has a petrol engine, all mileage can be claimed at the petrol rate.

It costs about £1.20-1.50 to charge & you would get about 22-23 miles per charge.

Errr, so, if my company leased an outlander phev, and if my journey was 35 miles each way, I could charge 16p per mile, for 20 miles (on electric), then 40p per mile for 15 miles? Or charge them both for 35 miles?

I'm quite tempted by the car. My divs take me into 40% and I pay a car loan of £300 (3yrs) for a standard people carrier.

Why is there not an orderly queue forming? This vehicle looks to tip the balance back to company leasing?

[BolshieBastard]

if you buy instead of lease, you might be able to claim some of the vat back.

No you wont. You'd have to buy a van or crewcab pick up. I understood hmrc closed the loophole some contractors used in buying a crewcab to re claim the VAT.

Thing is, a company car is different for everyone, so what may work for me, wouldnt work for you.

Even for larger companies, I dont see what is so good about a company car.
Ive had them in the past & hated the fact I got taxed on them. I much preferred a car benefit/allowance.

You were taxed (and NI'd?) on the car allowance, no?

[AMH]

if you buy instead of lease, you might be able to claim some of the vat back.
Thing is, a company car is different for everyone, so what may work for me, wouldnt work for you.

Even for larger companies, I dont see what is so good about a company car.
Ive had them in the past & hated the fact I got taxed on them. I much preferred a car benefit/allowance.

[BolshieBastard]

Hey folks, hope you are well.

I'm looking to purchase or lease a car, but have better things to do with the capital in 2015 to be honest.

I tried a quick search, but couldn't find any topics related for lease-back.

Is it feasible that I purchase a car through my company, and lease it back to myself at market value? Rule of thumb is leasing cost per month is comparable to ~1% of car value.

So I'm considering if I could purchase say, a 15k car under my company, and lease it back to myself for £150 pm or so? Obviously I would assess the depreciation in the car to ensure my company makes a small profit from me. More profit, more corp tax, everyone is happy - or are they?

Thanks for your help!

R

No of course you couldnt find anything despite there being a very recent post on a similar thing.

Yep go for it. Its the most tax efficient way to lease \ buy a car. Make sure its top of the range with plenty of 'extras' on it. You wont regret it at all.

[northernladuk]

I don't think a company car has to be available to all employees. Plus I think there are more options than simply the car is worth x new, has a CO2 rating of y therefore your BIK is z.

I don't know if it's still possible but when I was a permie the company had a system whereby they lent you the money to buy a car off them, new, with the condition you sold it back to them at 9K miles or 1 year at an agreed value. The BIK was therefore the interest on a loan amount for the difference in value at a rate agreed with HMRC. Basically peanuts. I paid about £40 per month on a £30K car. This was because the Co was classed as the importer of the vehicles, however it does show there are more options than the traditional company car route.

My point is that if it looks artificial and that you're taking the proverbial, then it won't fly and that 1% of the 2nd hand value of the car is just that.

Ah OK. The numbers are not going to work out anyway as it's well known it's in efficient to purchase cars through the company and the fact that no one else leases it back speaks volumes really. Any trick or twist that flies will be common knowledge and standard process for us..... And this one isn't.

[Pondlife]

You're right. When I was permie, my company car could be used by any employee who also had a company car; if they used their own car (and took the money) then they couldn't drive any company cars.

Plus not all employees are at a grade that qualifies for a company car.

[TheFaQQer]

I don't think a company car has to be available to all employees.

You're right. When I was permie, my company car could be used by any employee who also had a company car; if they used their own car (and took the money) then they couldn't drive any company cars.

[John8589]

A company car has to be available to all employees so can't be leased out to one.

A company car doesn't but a pool car does.

[Pondlife]

I wasn't really going to get in to the details as it's such a non starter but wouldn't the car be an asset of the company rather than a company car if it's to be leased out. A company car has to be available to all employees so can't be leased out to one.

I don't think a company car has to be available to all employees. Plus I think there are more options than simply the car is worth x new, has a CO2 rating of y therefore your BIK is z.

I don't know if it's still possible but when I was a permie the company had a system whereby they lent you the money to buy a car off them, new, with the condition you sold it back to them at 9K miles or 1 year at an agreed value. The BIK was therefore the interest on a loan amount for the difference in value at a rate agreed with HMRC. Basically peanuts. I paid about £40 per month on a £30K car. This was because the Co was classed as the importer of the vehicles, however it does show there are more options than the traditional company car route.

My point is that if it looks artificial and that you're taking the proverbial, then it won't fly and that 1% of the 2nd hand value of the car is just that.