Reply to: purchasing a company car... but not sure on future trading

[Peoplesoft bloke]

Car insurance and BIK - Google rocks

Company car benefit in kind | AccountingWEB

[Peoplesoft bloke]

but as a FYI not asking my accountant on this as I've asked them about a lot of stuff lately and they've told me any other enquiries (beyond the real fundamental ones around my accounts) are going be charged at ~£200/hour.

I'll do it for £150 an hour (I am not an accountant - but look at that discount).

[WTFH]

No, none of my mileage was company mileage. Straight perk.

No, if he's inside it won't be doing business for another company, it will all be personal, just like mine was.

If the car belongs to his company and the insurers say it has to be insured by the company, he can pay for it from company funds. If that would create a BIK and he doesn't want to go there, he could reimburse his company. I really don't see the issue here.

I stand corrected.

[WordIsBond]

If you're not trading you're not paying CT.
The only way you'll save any CT is if you can claim back a loss against previous years? How many years can you do that?
How much CT can you claim back for a loss the company, for a business expense that's not really a business expense?

I maybe missing the point but it makes very little sense to me.

He's trading right now, so presumably has profit this year to set it off. He can carry back loss and reclaim CT into the prior year. So if he's got sufficient profit in his current year and his prior year to cover the cost, he'll save CT on the whole amount.

OP, you would need to move on this before deciding to accept a new role, you know. If you accept a new role before buying the car, HMRC will say it was a dodge. They'd probably say the same if you started perm two or three weeks later.

I think you probably need to ask your accountant anyway. A lot of money involved.

[WordIsBond]

Didn't read any of this tbh but this is probably the worst time in the history of contracting to be considering buying a car through the company. It's only a good idea at the best of times in very particular circumstances but with the clusterf**k that is coming up to and after April, committing yourself to a company lease is a really bad idea.

What a good idea, comment without reading what it's about.

He's not talking about a lease, he's talking about buying the car outright, which can make a big difference....

[WordIsBond]

Yes, back in the day your employer paid, and most of your mileage was company mileage. Their policy would be business trips for the company that owned the car, and some personal.

No, none of my mileage was company mileage. Straight perk.

Whereas this will be one company owns the car, it's not doing any business miles for that company, but it is doing full business use for another company as well as personal.

No, if he's inside it won't be doing business for another company, it will all be personal, just like mine was.

I suspect that the insurers will make it difficult (or just expensive)

If the car belongs to his company and the insurers say it has to be insured by the company, he can pay for it from company funds. If that would create a BIK and he doesn't want to go there, he could reimburse his company. I really don't see the issue here.

Especially because I suspect there are a lot of company cars where the company owns it but the driver insures it. I suspect insurance companies are well-used to this and it isn't a big deal -- but if it is, he can just have the company buy the insurance and reimburse it.

That said, if he's not taking any income from his LtdCo because he's a brolly employee or PAYE with his client, a BIK for the insurance will be taxable income but it presumably won't be enough to incur NI, so if he's got the funds it isn't horrible. He can keep looking for an outside role the whole time and argue he deserves to be compensated for that, and is taking the car as compensation.

[Lance]

Well the benefit here is the 20% save on corporation tax for a vehicle I was looking to buy personally anyway with little to no BIK impact (0% next year, 1% year after). I've got a fair war-chest in the company.

If you're not trading you're not paying CT.
The only way you'll save any CT is if you can claim back a loss against previous years? How many years can you do that?
How much CT can you claim back for a loss the company, for a business expense that's not really a business expense?

I maybe missing the point but it makes very little sense to me.

[northernladuk]

Didn't read any of this tbh but this is probably the worst time in the history of contracting to be considering buying a car through the company. It's only a good idea at the best of times in very particular circumstances but with the clusterf**k that is coming up to and after April, committing yourself to a company lease is a really bad idea.

[lifexplorer]

Thanks again for everyone's feedback... I figured this would be a reasonable thing to do and overall it seems the responses validate that. Insurance...yeah, probably makes sense to pay that personally though I figure servicing and repairs would be fair to pay out of the company as it's maintaining a company asset

I generally sympathise with the "ask your accountant" feedback, so hate to invite it myself... but as a FYI not asking my accountant on this as I've asked them about a lot of stuff lately and they've told me any other enquiries (beyond the real fundamental ones around my accounts) are going be charged at ~£200/hour.

[lifexplorer]

I think it's a lot simpler.....

Your title is "purchasing a company car... but not sure on future trading"
My immediate to that is 'don't do it then'.

Why would you want to commit to a long(ish) term lease when the future of your business is not certain.
Forget the rest of it.

If you NEED a new(er) car then buy one for cash that you own personally.
See again in 2 years.

Well the benefit here is the 20% save on corporation tax for a vehicle I was looking to buy personally anyway with little to no BIK impact (0% next year, 1% year after). I've got a fair war-chest in the company.

[Lance]

I think it's a lot simpler.....

Your title is "purchasing a company car... but not sure on future trading"
My immediate to that is 'don't do it then'.

Why would you want to commit to a long(ish) term lease when the future of your business is not certain.
Forget the rest of it.

If you NEED a new(er) car then buy one for cash that you own personally.
See again in 2 years.

[WTFH]

Not sure why. My insurance was always paid by my employer back in perm days. I always assumed it was included in BIK calcs but to be honest I never did the maths to check.

So I suspect the company could pay it but it would have to be a BIK.

Probably cleanest if he paid the insurance personally.

Yes, back in the day your employer paid, and most of your mileage was company mileage. Their policy would be business trips for the company that owned the car, and some personal.
Whereas this will be one company owns the car, it's not doing any business miles for that company, but it is doing full business use for another company as well as personal.
I suspect that the insurers will make it difficult (or just expensive)

[WordIsBond]

Not sure why. My insurance was always paid by my employer back in perm days. I always assumed it was included in BIK calcs but to be honest I never did the maths to check.

So I suspect the company could pay it but it would have to be a BIK.

Probably cleanest if he paid the insurance personally.

[WTFH]

He's clearly thought about #1 & 3, and #2 is a good point but hardly a problem, just something to be sure to handle correctly. I suppose the question of whether the insurance constitutes a BIK is something he'd want to discuss with his accountant.

I would have thought that the insurance has to be personal, i.e. not paid by the company.

[WordIsBond]

OK, firstly, it's not just about the cost, but also about the BIK.
Secondly, the vehicle will belong to the company and will need to be insured, etc correctly.
Thirdly, when you come to winding up the business, the car is not yours. It can be depreciated at fair market value over time, but you'd still have to buy it off the business if you wanted to keep it.

He's clearly thought about #1 & 3, and #2 is a good point but hardly a problem, just something to be sure to handle correctly. I suppose the question of whether the insurance constitutes a BIK is something he'd want to discuss with his accountant.