Private or Limited Company Car for Director?

[Pravin]

I am director of a Limited Company.
I use my car for personal use(90%) and business use. I am thinking of buying a car. May I request some help reg. two issues-
1) Whether to buy in the name of Limited Company? May be hire purchase.
2) Will there be any tax advantage of buying a brand new car?

Thanks in advance.
= Pravin

[robbob]

Hi Pravin

Quite often it is tax inefficient buying a car through your limited company.

This is due to the fact that you will be deemed to have a benefit based on the original list price of the car when new and also the car CO2 emmissions.
The company also faces a NI charge on the benefit value.

And finally if the company pays for fuel for personal use there is another benefit charge(This can be avoided by reimbursing for private mileage)

The higher the list price when new and the higher the CO2 emmissions the less likely it is that it will be tax efficient to buy through the company.

Also the more business mileage you do the more the company can pay youself tax free if you own the car yourself.(You can be paid 40p a mile for the first 10k miles pa and 25p after that)

The reverse is also true though - if you buy a low list price car with low CO2 emmissions and do not do much business mileage then it may well be worthwhile including the car in the business. So as you are 90% private use this may be the best route if you can compromise a little on your car choice.

There is no advantage to buying a new car other than the fact that newer cars tend to have lower CO2 emmissions.

If bought on HP via your company the interest is allowable whereas if you buy privately you will not be able to claim anything.

There are other considerations too.
Cars can be expensive to insure in business name.
The will be extra forms to fill out if car is in company name if you do not do P11D's/Car P46. You will need to sort this out as soon as you purchase the car as there are submission deadlines.

[Pravin]

Hi robbob
Thank you for the detailed reply.
Much appreciated.
As you pointed out-
The reverse is also true though - if you buy a low list price car with low CO2 emmissions and do not do much business mileage then it may well be worthwhile including the car in the business. So as you are 90% private use this may be the best route if you can compromise a little on your car choice.
So --------- If I understand correctly I will go for used approved car 10-15,000 range (preferably HP); low emmissions in company name. How does the company benefit - depreciation? Who pays for the petrol, car servicing etc? (you guessed- new in business!)
Also I didn't understand the bit about -
you will be deemed to have a benefit based on the original list price of the car when new -- do you mean brand new car. What is this 'benefit'?
Thanks in advance.

[robbob]

Hi Again

Here is a link to the calculator which will work out how much you will get taxed personally.

http://www.hmrc.gov.uk/calcs/cars.htm

The company will also pay 12.8% Class 1A on the benefitable amount.

Even 15k original list price when new may mean this is not worthwhile. I was thinking under 10k!!. Note list prices are always higher than what you pay for a car even when new.

The company claims depn / repairs / hp interest / business use fuel tax etc.

The benefit is what you get taxed on personally Eg £3000 benefit means that you personally get taxed as if you had received £3000 of income in that tax year. Whatever you pay for the car does not come into any benefit calculation. It is the list price when new of the car that you purchase.

Note if you do high private mileage then perhaps it may be worth the company paying your private fuel and you having the additional benefit charge. The calculator above will give you an idea of how much benefit there will be.

If you do not understand company tax matters such as benefits/dividend payments/higher rate tax/ salary payments corp tax etc then a would recommend getting a decent accountant who can give specific advise for your circumatances it is almost impossible to give best advise without knowing your business in details.

[Pravin]

Thank again robbob
One last query-
How to find out list price of 55 reg car?

[robbob]

http://www.parkers.co.uk/cars/prices/?fromwelcome