Directors Company Car

[jonsmile]

Hi

I have read the forums / searched the net / hmrc and am now as confused as possible.

I am looking to get a new car, which I can do either as a company car (company either buys outright or as a lease) or as a private car.

1. As a director who earns less that £7000 per year, will I get a P11D hit on the car (or any other tax hit on the car?

2. Is this the vest way to get the car? I can see the savings on the vat and depn / corporation tax, but do not want to offset those company benefits by giving myself a massive personal tax bill.

The car will be worth about £30k and will do about 10k company miles per year. It will be a high CO2 diesel I expect.

Cheers
Jon

[ADP]

1. Yes there will be a P11d hit, unless you are a full-time director AND you own 5% or less of the issued share capital.

2. There would be no VAT saving as it is irrecoverable on motor vehicles. Depreciation is always added back for tax, you would however be able to claim capital allowances albeit subject to the restrictions on expensive cars. From the income tax point of view you're looking at a taxable benefit of say, £9,000 for use of the car plus another £4,500, say, if the company were to pay for all or part of your fuel.

It might be an idea to buy the new car through the company and sell it to the director six months down the line when it has depreciated in value by a quarter, say. You would pay the company a full market price at time of sale, of course, to avoid another BIK on the transfer of assets to director.

[paul13]

Hi,

I work for a small limited company with a turnover of around £1m the business is an ecommerce retailer, using our knowledge of the retail market we have recently set up a new company which will be supplying products wholesale, the nature of my job has now changed and I need a car. My boss has asked me to find the most economical way to find a car I like and that will do the job.

Am I correct in thinking-

I can buy a used car with low emissions for say £10,000, this would reduce the company car tax I have to pay personally, would I also be able to claim 40p a mile (1st 10,000 miles) and 25p a mile thereafter.

From the perspective of the business if a car is purchased on finance, am I right in thinking the company will be able to claim 20% of the cost a year against corporation tax? The flexibility of hire purchase seems a more attractive option than being locked into a lease agreement, also by working with a £10,000 budget rather than a 25k lease car the monthly payments on the finance agreement would surely be lower? I understand the interest on the finance agreement can be claimed against corporation tax.

I would really appreciate some advice on the best way to have the smallest possible effect on cash flow but to find a car which is modern enough to project a good company image.

[paul13]

Sorry forgot to mention, the director of the company already leases a car through the £1m company but the other company has not started trading yet but has been formed.

[msp]

I can buy a used car with low emissions for say £10,000, this would reduce the company car tax I have to pay personally, would I also be able to claim 40p a mile (1st 10,000 miles) and 25p a mile thereafter.

The taxable benefit is based on the manufacturer's list price, not the price you paid for it.
If it is a "company car" then you can claim only the cost of fuel for business mileage; the rate depends on engine size. http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm