Company Car

by **SYR** on Fri Jan 27, 2012 4:08 pm

I run a small limited company and now consider to employ my friend's daughter as a part-time clerk to help out admin work and filing etc.

I'm going to pay her £100 per week (2 days) and provide her with a low CO2 emission company car (150 CO2 with list price £12,000) so that she can collect samples etc from our suppliers. Do I have to account for any benefits in kind for car and fuel???

Also, can I claim the VAT on the purchase of the car? Any other tax / national insurance issues I have to look out for?

Many thanks

by **Tax Champion** on Wed Feb 15, 2012 4:28 pm

The basic rule is that if the salary plus all expenses & benefits totals less than £8500, the benefit is not taxable. In this case the car benefit would be calculated as 20% of the list price, ie £2400, and the fuel benefit would be £3760 (!) so if you were to provide a car and fuel the total benefit of £5760 would be subject to tax on the employee and class 1A NIC on the employer. However if you were to provide a car only, with no fuel, the car benefit would not be taxable as the total remuneration would be less than £8500. In this case you would not be able to re-imburse fuel for business travel of more than ££900, as even tax allowable expenses are taken into account for the £8500 threshold.
You might want to consider supplying a lower emissions car to keep the benefit rate down.

As the car will be a business purchase, you can reclaim the VAT.

by **fidodido** on Wed Feb 15, 2012 4:41 pm

Re the VAT... You can only claim VAT on a car if there is no personla use on the vehicle.

If there is no personaluse on the vehicle then there will also be no Benefit in kind on the employee. You would need to make sure it meets all the criteria though with personal use as the terminology used by hmrc relates to " being available for persobnal use".

You could always get a little van as BIK on van is very low and you can claim vat back on purchase of a van.

by **Generix** on Mon Feb 20, 2012 3:56 pm

VAT back on car, basically no.

VAT back on fuel is possible in various ways - search 'VAT motoring expenses' on HMRC website.

by **King_Maker** on Mon Feb 20, 2012 4:39 pm

Will it be kept at her home address?

Will she be using it privately (home to work will normally be private use)?

by **Generix** on Mon Feb 20, 2012 6:29 pm

King_Maker wrote:Will it be kept at her home address?

Will she be using it privately (home to work will normally be private use)?

Even if it's kept at company premises, under lock and key with detailed mileage log and a strict "no private use policy" etc. HMRC are notorious for challenging input VAT recovery on cars to the point that, unless you have the time/resource/will to argue with them, or if e.g. you have a large fleet (or the car in question is worth significant amounts) then its more hassle than its worth to recover the VAT.

Normally I am always the one who says, "just go ahead and claim it, chances of it being found are low and then chances of HMRC knowing the rules are even more slim etc" but in the case of cars, its one of the first things you're taught to go after and is an 'easy win' for a visiting officer.

Cars, client entertainment, bad debt relief (6 month rule) are bread and butter stuff to visiting officers so make sure they find something, but best to make sure that something is small...not input VAT on a car