Reply to: Company Car Tax - between companies

[LisaContractorUmbrella]

That is exactly right. I just didn't know if I could avoid the company car tax as effectively my company would be doing work for them, not myself. However since the original post I understand that I have a slightly more complicated matter of IR35 to look into first.

Thanks for your reply tho.

As NLUK says you will most definitely, without question be inside IR35 which means that any money you earn through your company would be subject to PAYE tax - you would be liable for income tax, employee's NI and employer's NI. You would also lose all the benefits of being a permanent employee so unless you can negotiate a rate considerably above your current salary you would be a lot worse off.

[northernladuk]

That is exactly right. I just didn't know if I could avoid the company car tax as effectively my company would be doing work for them, not myself. However since the original post I understand that I have a slightly more complicated matter of IR35 to look into first.

Thanks for your reply tho.

Nothing complicated about it. You are inside. Most clear cut example I have seen tbh.

[dmh]

So, let me get this straight - you want to become a contractor but you will be doing the same job you are doing down, for the same employer, under the same conditions and with the same company car. Is your employer paying you more to work for him on this basis?

If your earnings warrant it you will still be paying 40% tax regardless of whether you are employee, contractor or Mr Benn

That is exactly right. I just didn't know if I could avoid the company car tax as effectively my company would be doing work for them, not myself. However since the original post I understand that I have a slightly more complicated matter of IR35 to look into first.

Thanks for your reply tho.

[LisaContractorUmbrella]

My relationship with my current employer is such that even if I switch to being a contractor (if allowed IR35 considered etc) that they would let me keep my car, they would continue to pay for it and I will be allowed to do personal miles. As my 9 to 5 will still be with them.

I am going to be taken on a business that's completely separate (it's a retail shop) with no conflicting interest other than my time. I didn't know if, when setting up this company as a ltd, if I could use this as an opportunity to become a contractor and not pay any more 40%. I understand that I need to consider IR35. What I don't know if what happens to my company car that I have already. As previously mentioned I will be able to keep and use the but I'm not sure if I'll be liable for BIK. My current employer will be flexible and help me out if I need it be allowing me to invoice from whatever company I want.

So, let me get this straight - you want to become a contractor but you will be doing the same job you are doing down, for the same employer, under the same conditions and with the same company car. Is your employer paying you more to work for him on this basis?

If your earnings warrant it you will still be paying 40% tax regardless of whether you are employee, contractor or Mr Benn

[Nathan SJD Accountancy]

The OP wants to work for his employer Monday to Friday, and do contracting work for his clients via his limited company during the evening/at weekends.

At least it read that way to me

That's how I understood it... plus the OP wants to use the company car for his other business.

[Nathan SJD Accountancy]

My thoughts as I understand some of the information provided, without going into too much detail is that the OP as an employee is provided with a car for business and private use. As a result, he will be taxed on it personally through his tax code etc through his main employment.

The fact that he then uses that car outside of work for other uses, I can't see being a major issue, he will still be taxed as though it is a BIK through his main employment. The amount of use is irrelevant in my opinion.

Whether the OP's company or the OP will be subject to additional tax, I can't see why they would be as the OP's company is not the one supplying the car and the OP is already being taxed for being provided with a car for personal use.

Only slight implication I can see is whether your employer specifically states what type of personal use you are able to use the car for e.g. they might say 'you are not to use this car for your limited comapny'.

In answer to your question, no, I have not dealt with this, but above is my thought process in coming to a decision based on what you said. Let me know if you find any HMRC topics covering this as ASB mentioned there may be, but I haven't found any on the quick look that I had.

*Reading back through, I think you should give someone a call and explain the situation to them, as I am struggling to understand the exact situation that you are currently or intending to be in*

All the best.

[ASB]

OK. Thanks for all the advice.

Completely ignoring all the other advice and considerations there is quite a lot of information about providing cars to another companies employees on HMRC website.

Had stumbled across it once but can't find it just at the moment, but I'm sure you can search.

[dmh]

OK. Thanks for all the advice.

[northernladuk]

My relationship with my current employer is such that even if I switch to being a contractor (if allowed IR35 considered etc) that they would let me keep my car, they would continue to pay for it and I will be allowed to do personal miles. As my 9 to 5 will still be with them.

Ok well you are most definitely inside IR35 without a shadow of a doubt and IMO this is a bad move. Just the fact they are letting you use the car puts you inside let alone the whole Friday/Monday contractor thing. You are just using it as a blatant tax avoidance method which will come unstuck big style.

I am going to be taken on a business that's completely separate (it's a retail shop) with no conflicting interest other than my time. I didn't know if, when setting up this company as a ltd, if I could use this as an opportunity to become a contractor and not pay any more 40%. I understand that I need to consider IR35. What I don't know if what happens to my company car that I have already. As previously mentioned I will be able to keep and use the but I'm not sure if I'll be liable for BIK. My current employer will be flexible and help me out if I need it be allowing me to invoice from whatever company I want.

The shop has sod all to do with being a contract. Keep them separate so as not confuse yourself and us.

I bet your current employer doesn't know how much it is going to cost him if you get caught either but I am sure he will be happy to release all his employer restrictions over you i.e. not giving you notice, no redundancy, just walk you when he fancies with you not being able to challenge any of it as you are no longer an employee. Be very wary if an employer is happy to let you be a contractor. You lose a lot of rights and it becomes much easier to bin you with no come back on him.

IMO... Walk away from that idea completely. You will NOT become a contractor, you will be involved in a tax fiddle.

[dmh]

My relationship with my current employer is such that even if I switch to being a contractor (if allowed IR35 considered etc) that they would let me keep my car, they would continue to pay for it and I will be allowed to do personal miles. As my 9 to 5 will still be with them.

I am going to be taken on a business that's completely separate (it's a retail shop) with no conflicting interest other than my time. I didn't know if, when setting up this company as a ltd, if I could use this as an opportunity to become a contractor and not pay any more 40%. I understand that I need to consider IR35. What I don't know if what happens to my company car that I have already. As previously mentioned I will be able to keep and use the but I'm not sure if I'll be liable for BIK. My current employer will be flexible and help me out if I need it be allowing me to invoice from whatever company I want.

[kingcook]

The OP wants to work for his employer Monday to Friday, and do contracting work for his clients via his limited company during the evening/at weekends.

At least it read that way to me

[northernladuk]

If your employer is providing you, his employee, with a company car then you will pay additional tax (change of tax code to a 'K' code) as it is considered to be a benefit. If you are going to change your status from employee to contractor but continue to do the same job you will be inside IR35 and there would still be tax payable on the car as it is still a BIK. If you are going to be running another business totally separate from your current employer why would they pay your mileage??? Am I missing something here

Indeed, and where is this break between companies? Total mess this thread is.

[LisaContractorUmbrella]

I will be : remaining in employment with my current employer, and have a totally seperate business on the side

If your employer is providing you, his employee, with a company car then you will pay additional tax (change of tax code to a 'K' code) as it is considered to be a benefit. If you are going to change your status from employee to contractor but continue to do the same job you will be inside IR35 and there would still be tax payable on the car as it is still a BIK. If you are going to be running another business totally separate from your current employer why would they pay your mileage??? Am I missing something here

[northernladuk]

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.

[dmh]

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