income shi*ting + company cars

[Fred Bloggs]

OK what's the case for buying a cheap, new little run around motor every year. One that qualifies for the lowest band of VED and the 100% right off?

If you are on flat rate VAT you can claim some of the VAT back because it is a >£2k capital purchase? Interesting.

[philip@wellwoodhoyle]

It is widely anticipated that the Chancellor will remove the £8,500 threshold in next weeks Budget resulting in BIK tax due on all employees, even those earning less than this limit. I think it was announced last year that he was going to scrap the £8500 limit to make things easier for employers so that they had to do P11ds for everyone with a benefit - i.e. the usual giving the bad news a positive spin.

Getting back to the original question, yes I think there is mileage in putting a car through the company again - especially if the car has a low list price and better still has a low CO2 emission rating. Even better would be a car with less than 120g CO2 as the company would get 100% first year allowance on its purchase and the employee would pay a far reduced BIK tax rate. It is very unlikely that HMRC will start arguing about schedule E remunerable wages and benefits as they will get their pound of flesh of NICs - it is easy to argue that a spouse is worth £5k to £10k p.a. and I've never seen HMRC taking this point where the spouse does at least some basic admin work - they go after the ones who do nothing or who are paid a lot more.

[Fred Bloggs]

The chimps at HMRC will insist that your wife's co car is really yours in disguise.

[moorfield]

Just spotted this on SJD's website.

The provision of a car for an employee (NOT a director) who is paid at a rate below £8,500 per year (including the value of benefits) does NOT attract any charge to income tax. Nor is there any charge on fuel for private use provided to such employees.

Still confused. I think I'll keep this idea on the back burner until after we get stiffed next week.

And yes, before you mention it, I'll speak to my accountant.

[Fred Bloggs]

Years ago, I used to park my co car at the airport from Monday morning till Friday evening. For most of the year. I asked if I could get relief on the BIk for the time I spent in other countries. The answer came back that the car was "still available for use" even though I was in another country. So I then got taxis instead and left the co car at home for the missus to use. I know that's a bit off topic but it demonstrates the mind set of HMRC regarding co cars.

[ASB]

Years ago I had a company car. Mrs ASB also had a company car. Curiously the total value of Mrs ASB bik and her salary was 8k - thus under the 8,500 limit and attracting no BIK.

Then along came HMIT. This was a very contentious subject. Hector was absolutely adamant that Mrs ASB car was my second car and I should be bik'ed on it (@ 1.5 times the regular rate of course).

HMIT Eventaully backed down when it became obvious we would actually go to the commissioners and let them decide if need be. So, you might get lucky. But it's a lot of stress.

[Fred Bloggs]

You're going to have a hard time convincing the HMRC that the "company car" really isn't "available for use" by you and therefore making you subject to BIK whether you use it or not. I think you need to try a lot harder than this!

[moorfield]

I'm wondering if the income shi*ting rules will make owning a car via ltdco more attractive again ? Any thoughts on this idea, I'm sure there's a flaw somewhere ... ?

I bought a new car recently - already paid for by me, < 1000 miles, £11k ish list price. A quick squiz on HMRC s calculator puts the BIK charge at £3k ish. Now, if missus M is removed from the company shareholding next year, is unpaid but continues working for the company and is given use of the car as a BIK (I have another one to use) then I think that BIK could be justifed as a reasonable reflection of her contribution to the ltdco compared to mine. The tax/ni on this will be a few hundred quid I think.

So, I can extract £11k by selling the car to ltdco which isnt divis but capital expenditure.
Additionally, all MOT, tax, service, parts etc. is chargeable to the ltdco going forward, plus depreciation on the ltdco asset. Keep petrol out of the equation (just confuses matters).

Overall I may be out of pocket slightly but I've extracted a sizeable sum from the company which is off the income shi*ting radar.