Reply to: Buying a Tesla through the business

[WTFH]

Oh, and given all your other posts about having an electric company car under your banned username, you really are a prime chump.

[WTFH]

I don't really understand why people are saying this is a bad idea?

if you’re not interested in understanding why people disagree with you, then why did you ask the question in the first place?

also, if you’re paying £2,000 per year on insurance, then it sounds like there’s several bits of the story you don’t want to tell us.

[ladymuck]

Are you properly comparing the terms of the agreements - business vs personal, or assuming you can get personal terms but set the DD up from your Ltd Co?

Have you factored in that you will need business car insurance policy, not just a personal one that covers commuting (hint: if you use the car for business use, you will never be commuting).

Saying that the BIK and NIC is negligible is fine but you do need to consider how that affects the tax you pay on any other company drawings - your BIK will affect your tax code, reducing what you can draw out of your company at the lower rate, for example. So have you looked at what you would ordinarily draw and made the necessary adjustments?

Are you confident that your company will be trading in three years and so will be able to meet the repayments every month?

How do you know what funds you will have in your company in three years' time?

[greenpower112]

I don't really understand why people are saying this is a bad idea? Can someone tell me where my maths is going wrong.

Car costs 60k. Company makes revenue 150k, expenses 2k. Note: I am a higher tax payer.


1. Buy the car personally. So we calculate profit which is (150 - 2) * 0.79 = 117k. We release 80k in dividends (60k for the car + 20k dividend tax).
Insurance over 3 years is 6k which again to release from the company would cost so that's 8k.

117 - 80 - 8 = 29k cash left in the company.

After 3 years the car depreciates and is worth 35% less so I have a personal asset worth 39k and 29k cash in the company account.


2. Buy the car through the company. It's now 54k due to 10% VAT reduction. Fully corp tax deducatable as an allowance (as is insurance)

(150-2-54-6) * 0.79 = 70k profit

There is a caviat here - we have to pay BIK 2% and class 1 NA but these are minimal and not worth considering for the purpose of the final figure.

After 3 years the car depreciates and is worth 35% less so I have a company asset worth 39k and 70k cash in the company account.

I now gift the tesla to myself which means I have to pay 40% BIK on 39k which is going to require dividend drawdown of 15.6 + 5 (tax) so call it 21k.
This leaves 49k in the company account.


So scenario 1: in 3 years I have a car worth 39k and 29k in company account
Scenario 2: in 3 years I have a car worth 39k and 49k in company account AND the ability to keep the car in the company name in case they keep BIK as 2%

[greenpower112]

Or buy/lease the damned thing yourself and charge the company for using it. Which is by far the more sensible, risk-free way.

Wrapping isn't a modification anyway, it's a cosmetic. You can take it off any time you like.

Where is the risk?

[greenpower112]

its the company's car so yes the company pays for modifications. The wholly and exclusive test is irrelevant as you pay BIK.

for my money this is just a dumb idea.
Buy the car you want personally and charge the business 45p per mile. If you can't afford the car you want then address your desires.

I don't really understand what you don't understand? What has affordability got to do with any of this? I can afford to buy the car tomorrow out of my own personal pocket OR out of the company's pocket either way. What I am trying to do is save on tax.

[Lance]

I was chatting with an umbrella earlier today who are looking at allowing people to lease an EV while working through that umbrella.

In that scenario an EV starts to make a lot of sense as you can get a Model Y for less than £6000 of post tax income a year...

what happens when the 3 month contract comes to an end?

My main issue is the unknowns. If I own a car outright (no finance) personally, no matter what happens with company/contracts/etc. I still own that asset. If I no longer need it I can sell it. If I need it for business then there is a funding model for it (albeit not very generous with recent fuel price increases). And my car costs a LOT less than £6k a year.
But it is admittedly a subjective opinion I have.

[eek]

its the company's car so yes the company pays for modifications. The wholly and exclusive test is irrelevant as you pay BIK.

for my money this is just a dumb idea.
Buy the car you want personally and charge the business 45p per mile. If you can't afford the car you want then address your desires.

I was chatting with an umbrella earlier today who are looking at allowing people to lease an EV while working through that umbrella.

In that scenario an EV starts to make a lot of sense as you can get a Model Y for less than £6000 of post tax income a year...

[Lance]

Ok, if I do buy a tesla through the business - the company owns the car. So let's say a wheel pops - the company pays. How far does that extend though? I got a quote for £3300 for matt black wrap just now - can the company pay for car modifications as well?

its the company's car so yes the company pays for modifications. The wholly and exclusive test is irrelevant as you pay BIK.

for my money this is just a dumb idea.
Buy the car you want personally and charge the business 45p per mile. If you can't afford the car you want then address your desires.

[northernladuk]

I could be wrong but if the OP is looking at his business to buy a bigger and better car plus modifications than he would buy normally isn't good budgeting. Yes there are tax breaks but that's only taking the sting out of something he wouldn't buy normally and it will still cost him at the end of the day. And then there is the depreciation and buying it off the company which gets taxed on and so on and so forth. It's rarely a good idea to look at the company as a means to get something you couldn't or wouldn't normally buy. Keep a level head and don't get carried away in the heat of the moment just because you think you can step your motor up to a level you didn't think you could before.

[WTFH]

J...Looking at business hire purchase (1500/m for 36 months and pay it off sooner) ...

Have you checked the business HP to see if it allows a company to pay it off early?
It's not like a personal contract.

As for wrapping it, that would not be part of the hire purchase agreement.

[malvolio]

Or buy/lease the damned thing yourself and charge the company for using it. Which is by far the more sensible, risk-free way.

Wrapping isn't a modification anyway, it's a cosmetic. You can take it off any time you like.

[northernladuk]

The car itself doesn't pass that test - hence the BIK tax, right? The car is mainly used by me personally - I only make 4-5 business trips a year. But that's why we take the advantage of the low BIK tax on electric cars.

Just wondering how any car modifications work. Can company pay for them and then I pay BIK tax on those as well?

Within reason yes, it will just add to the value the BiK is taxed on. Remember, this will cost you at the end of the day. You are only getting a discount on it.

Also, if you are going to take the piss then it's generally another reason not to do it.

Have you checked the VAT out and how that works?

Also remember you are asking a bunch of contractors here. If you are going to modify it and the like you are better off speaking to your accountant who knows your exact situation and about the VAT/Tax.

[greenpower112]

Do the car modifications pass the wholly, exclusively and necessarily test?

The car itself doesn't pass that test - hence the BIK tax, right? The car is mainly used by me personally - I only make 4-5 business trips a year. But that's why we take the advantage of the low BIK tax on electric cars.

Just wondering how any car modifications work. Can company pay for them and then I pay BIK tax on those as well?

[ladymuck]

Ok, if I do buy a tesla through the business - the company owns the car. So let's say a wheel pops - the company pays. How far does that extend though? I got a quote for £3300 for matt black wrap just now - can the company pay for car modifications as well?

Do the car modifications pass the wholly, exclusively and necessarily test?