Help New Company Car Or Not???

dickieg

Now ive bought a franchise and i have to use my car for business, i can either get 40p a mile or get another car and put it against my company, im VAT registered. What would be or is the best thing to do and could i part exchange the car we have at the moment. Thanx in advance

Lyndsay101

Hi

You should calculate the costs of both options per annum to see which is most cost efficient. You would need an idea of the mileage covered, the car you currently own, the car you would have the Company provide.

Private Car
1. Private car - add up all your running costs, insurance etc.
2. deduct the reimbursement of petrol - multiply your likely mileage by 40p. (you get 40p per mile tax free for the first 10,000 business miles and 25p per mile for any further mileage, anything in excess of this is taxable).
3. VAT wise, the Company can claim input tax on 12p per mile (i.e. the amount of the 40p that rates to petrol).

Company car -
1. Will the Company lease or buy? Would you be joining a franchise-wide scheme that benefits from bulk buy discounts? You should factor in these costs.
2. The car will not be deducitble in the companys trading profits, instead it will get capital allowances. I think the rate is 20% (maybe 10%??) capital allowances on the car per year, but this is restricted to a maximum of £3000 for cars costing over 12,000. You can get additional allowances, of up to 100% for very CO2 efficient cars.
3. The car would be a taxable employment benefit for you. This would be subject to income tax and employers NIC. Its calculated on a CO2% multiplied by the list price of the car. HMRCs website has a calculator to help you with this - if you google "HMRC Car Benefit" its the first link that shows. The Company will also have to pay Class 1A NIC on this benefit at 12.8% of the benefit.
4. Mileage wise - Do not have the company provide you with private fuel, as there is a huge tax charge, as as the Company is yours it just wouldnt be cost effective. For business mileage reimbursed in a company car, you can get 12p per mile tax free from the Company (must keep receipts).
5. If theres any private use of a company purchased car you can't claim the input VAT back on purchase. You can claim back 50% of a leased car VAT (quirky rule!). In respect of future maintenance costs, these are deductible from the Company's trading profits and you can claim VAT back in full.

I hope this helps you arrive at a decision

L