[leetennis]

Hi guys, been reading the m3 lease deal thread and I'm trying to understand the cost implications of a company car.

We run our own ltd company and take a mileage allowance for business miles.

How do things change if we purchase a car through the business? I guess we no longer claim back business mileage but instead claim the cost of fuel?

BIK is something the user of the car pays that's all I know!

Can personal usage come into it?

Who pays to insure and is this generally more expensive insurance?

Sorry for all the questions!

[Moh]

http://www.hmrc.gov.uk/cars/ good place to start but I'm sure the financial advisors will be along soon...

[leetennis]

Thanks bud, bit clearer now. Would like to hear from anyone using a company car including private use, and those running a ltd co see how is benefits them if at all

[Dannyrado]

Originally Posted by leetennis

Thanks bud, bit clearer now. Would like to hear from anyone using a company car including private use, and those running a ltd co see how is benefits them if at all

Yep, you get slammed. Don't bother. Company car with private use that is. I'm not saying there isn't another way.

[leetennis]

Originally Posted by Dannyrado

Yep, you get slammed. Don't bother. Company car with private use that is. I'm not saying there isn't another way.

What's the alternative? You sound informed!!

[davyk31]

Company car works well if company pays fuel and you have lots of private miles. You then pay BIK on car and fuel. After that its a matter of working out your individual position but for an M3 it will be a killer as CO2 is so high.

[leetennis]

I looked at an efficient dynamics model put it till doesn't seem to be that advantageous.
Is leasing any different, being that you could offsett 100% of the cost against tax?

[M3-FAST]

Why not get an M3 and just carry on using the same method as you always have?

I have a ltd company also and run my cars as personal lease and claim mileage back thru business

If the finance company insists it is a business only lease then you can prop it in the business name and normally after first payment has come out get a form to change the direct debit to your personal account

Failing that just show the car payments as dividend on the accounts which keeps it 'out of the business' so to speak

[davyk31]

Buying the ED model is mega tax efficient for a limited company as you write down 100% in year one. Buy it on last day of your company year and immediately knock 30k off your taxable profits. That reduces the car cost to under 24k and less if profits are higher.

Limit change next April so needs to be before then.

[Dannyrado]

Originally Posted by davyk31

Buying the ED model is mega tax efficient for a limited company as you write down 100% in year one. Buy it on last day of your company year and immediately knock 30k off your taxable profits. That reduces the car cost to under 24k and less if profits are higher.

Limit change next April so needs to be before then.

+1.

Even better as self employed though, if you were just in the 40% bracket for instance...

Which is why there are 2 x low emissions cars on my drive. It's all swings and roundabouts tbh.

You could always go and buy a transporter kombi like I have decided to do too. Or a pickup if you're not bothered about fuel economy. I know neither are an M3 btw...

[doughboy]

We run a limited co.

Without doubt, if its not an eco car, pay yourself the tax free 45p/mile from from the company and fund the car yourself. its easy to, ahem, round the miles up

As soon as the co buys the car for your useage you'll be paying the BIK, which remember is all based on list prices until its 4 years old, NOT what you paid for it. i.e you pay tax on a 62grand list price for years, 1, 2, 3 & 4!

So 35% of 62k for an M3 is 21,700 in BIK per year!!!!

i.e. if you're a 40% tax payer that's an extra £8680 per year tax bill for you personally! That £723 a month in tax! nearly twice the lease fee and dwarfs any small savings in vat.

So better pay the lease fee from your dividends/wages/mileage and SAVE 8 grand a year!

If you own the company, then whether you or the company pays for something, it's still YOUR money at the end of the day, the only difference is the tax bill!

[SteveC]

Imagine:
long-jump where over-stepping the board would get you thrown out of the competition
Football, where an offside offence would see you sent off
Tennis, where a footfault would have you disqualified
Javelin, where a no-throw would mean the end of your competition
Off course such rules don't exist as they would ruin the sport

So how come a single false start in swimming or running gets you thrown out of the Olympics?

Imagine training 4 years, only to be thrown off the starting line for a single, minor, harmless infringement.

Kind of like Formula 1, where a driver is put back 5 places on the grid for a gearbox change, like the driver has anything to do with the gearbox. Surely if something is wrong with the car, punish the constructor, not the driver. There a driver's and a constructor's championship so its easy to deduct points for rule infringements by the constructors.

Formula 1 got to the point where the rules have more influence on the outcome than the driving, at which point I lost interest.

Sometimes the rules and their enforcement are so stupid they ruin the sport.

Yesterday I went to watch Brazil play Honduras. Utter waste of time and money with the match ruined by an overzealous referee who seemed to think that football is a non-contact sport. On the other hand the acting was pretty amazing.....dying one second, sprinting up the pitch the next. As long as the ref blows-up, the acting continues. Last football match I'll be going to.

As you may have gathered; I'm not feeling inspired

[AlanQS]

Your problem is that, however you look at it, you are paying the cash. There is no advantage in the company buying it because it's your company.

e.g. If it wasn't your company and you did a lot of miles privately then the company paying for private miles would make you quids in because the private petrol tax is about £1,500 per year so you only need to do around 6,000 private miles a year to be cheaper.

Otherwise, never take company fuel. Buy the car yourself, pay yourself mileage allowance (60p per mile for large engined cars for the first 10,000 miles and 35 or 40p thereafter - 45p and 25p for 2 litre and under cars) - unless they've scrapped the higher allowance, and the company can claim your expenses back against tax.

Pay yourself a car allowance if you like. You have to pay tax and NI on it but again, the company claims tax back as an employment expense - assuming you are classed as an employee. For an M3, you have to avoid BIK as it will cost you too much in tax - as already stated.

Note that you can buy your car yourself and avoid BIK but you can still get private fuel from the company if you would otherwise spend more than £1,500 per year on private fuel. Again, the company can set that against tax.

Note also that if the company is paying you mileage for business miles you can claim the VAT element of that fuel back from the tax man.

[davyk31]

Agree mostly Alan but private fuel tax can be a lot more than £1500, again it depends on the Co2 of the car times a fixed figure of £20200. Therefore if an M3 is in the 35% tax rate this gives a BIK sum for fuel of £7070, tax on this @ 40% = £2828

[SteveC]

Originally Posted by davyk31

Agree mostly Alan but private fuel tax can be a lot more than £1500, again it depends on the Co2 of the car times a fixed figure of £20200. Therefore if an M3 is in the 35% tax rate this gives a BIK sum for fuel of £7070, tax on this @ 40% = £2828

Absolutely! In my case, drining an X5 I'd need to cover 18,000 of private mileage before a company fuel card would cancel tax.

This must be one of the few countries in the World where the tax is higher than the benefit.

I spent a lot of time studying the various combination and implications of company car tax law and reached the conclusion that I was better off getting cash instead of car, paying for my own fuel and claiming back company related mileage

The fact that the compay car tax laws were established by a Socialist, non-driving chancellor whose electorate collectively have few aspirations or expectations of ever driving a company car goes some way to explain the almost punitive nature of the legislation.

[AlanQS]

Thanks guys, I hadn't realised the fuel benefit calculations had changed. The last time I looked (four to five years ago) there was just a single lump charge regardless but that's obviously changed!

Makes the argument against company funding of either car or fuel an even bigger negative.

[Vaheed1]

I found it easier and cheaper to personally buy/lease a car and then cross charge my company(ies) for the use of it. i.e - claim my mileage allowance back. At the end of the day - it's your company and, ultimately, you're still paying for it.

[davyk31]

Originally Posted by AlanQS

Thanks guys, I hadn't realised the fuel benefit calculations had changed. The last time I looked (four to five years ago) there was just a single lump charge regardless but that's obviously changed!

Makes the argument against company funding of either car or fuel an even bigger negative.

Thats a bit too general a view to be honest. Whether it works or not really depends on the Co2 of the car. If its a low percentage then free fuel can still be a massive benefit to some. Say its a 320 ED, taxable benefit on fuel is £2626, to a basic rate tax payer that costs £525/year or higher rate is £1050. Those figures equate to £43.75/month and £87.50/month, even with very low private miles that has to be a bargain.

Clearly as the Co2 rises and the percentages thus rise the equation tips but unless someone is doing very low private miles then it can still be a decent perk.

[davyk31]

Even for something like an M3 it can work depending on miles, tax on fuel for a higher rate tax payer would be £2828. Thats about 460 gallons which at say 20mpg = 9200 miles. Therefore if you had an M3 on the company and were doing more than that level it would be advantageous to take the free fuel.

[SteveC]

Originally Posted by davyk31

Even for something like an M3 it can work depending on miles, tax on fuel for a higher rate tax payer would be £2828. Thats about 460 gallons which at say 20mpg = 9200 miles. Therefore if you had an M3 on the company and were doing more than that level it would be advantageous to take the free fuel.

The company car tax system, designed by the previous Government was designed, (we are told), to minimize C02 emissions.

Logically then, the only way to benefit from the system is to drive a car with ruinously high fuel consumption and the highest C02 output. That sounds about right, given how well their other policies have met their targets. Another example; diesel engines offer by far the best fuel consumption, so diesel has higher tax than petrol.

[davyk31]

Not really, see my example above, most people could get a decent benefit out of running a low emisisons model like the 320D ED and getting free fuel from the company.

[doughboy]

Agree davyk31, but folks on here are trying to think of tax efficient ways to run high performance gas guzzlers on a relatively low mileage lease, not motorway eco warriors.

It's never going to work that well with BIK, whereas the own-car approved mileage rate is (at present anyway) unrelated to CO2, so that is the best way to run a high perf car.

And most importantly, as said before, if YOU own the company, then its all YOUR money at the end of the day regardless of who pays.

Only the TAX bill differs.