Company car or not?

missile

I own a small business, which has generate circa £40,000 profit in my first year of trading and I am looking for ways to reduce corporation tax bill.

My wife and I are co-shareholders. She is company secretary and has a part time job with NHS, circa £4,000 taxable income after deducting superanuation.

We bought her a car in July for £20,000. I thought it might be better to sell this to the company thereby reducing profit and depreciation would come out of company funds. I appreciate we would declare the car as benefit on P11D.

Before I speak with my accountant I thought I would ask if you think this a good idea? :A

real1314

You can't claim depreciation against tax; you have to claim capital allowances.
Cars under 110g/co2 are allowed full capital allowance in the year of purchase, between 110 and 160g it's 20% of cost per annum on a reducing balance basis; over 160g it's 10%. iirc

The rules on cars are quite complex, you'd do well to review them all before considering further.

:cool:

Carl31

Remember as a benefit, a car would be taxable for your own income tax, so if there is any benefit to be gained for the co, this probably wouldnt be the case with regards to personal tax

missile

Thanks guys. Might not be such a good idea after all? I shall have to give this some thought.

Bean_Counter

real1314 wrote: »

Cars under 110g/co2 are allowed full capital allowance in the year of purchase

This only applies to new cars, according to this.

missile

Many thanks to all for your wise words.

Jimmo,
Please be advised I have no desire to fool my accountant or indeed the tax man. I was hoping for some advice on how to reduce my liability.

Your company buying a brand new car to be used as your wife’s company car could have been one thing but your company buying a used car from your wife is a very different thing.

Surely this would be just the same as if the company bought a second hand vehicle from a dealer?

Of course you are right that I ought to have discussed with my accountant, unfortunately he is not very forthcoming with suggestions.

missile

Many thanks Jimmo, for your detailed answer.

I did not intent to critiscise my accountant. In my experience most are not forthcoming with suggestions.

I realise I did not give enough info for a detailed calculation. My circumstances are a little unuasual and to give all the info would possibly raise more questions than answers. I shall try to work out the sums to show how I think it may be beneficial for your critical comment.

The car is a second hand TT roadster. Not exactly MSE, but my wife is happy!

Sambucus_Nigra

missile wrote: »

I did not intent to critiscise my accountant. In my experience most are not forthcoming with suggestions.

No offence but all the accountants I've ever worked with have always been devious little shysters [in the nicest possible way]...perhaps you aren't asking the right questions of them?

missile

Sambucus_Nigra wrote: »

No offence but all the accountants I've ever worked with have always been devious little shysters [in the nicest possible way]...perhaps you aren't asking the right questions of them?

I would not call them that :rotfl:
However, I would agree with you I do need to ask the right questions. Hence my attempt to get some advice so that I am better prepared before I discuss with my own accountant.

missile

jimmo wrote: »

.... The point I was trying to make is that if it was a good plan in your particular circumstances for your company to buy a car for your wife’s use it would have wiser to do it in the first place.
.

Agreed, I should have thought about this earlier.

It would be my intention to sell the Audi TT to the company. My wife is company secretary and a director. Her taxable income is circa £4,000 pa. Please be advised, the current list price is £25,320 and we purchsed it second hand in June 2011 for £20,000.
I calculate car benefit charge would be £5,561.00 giving us a tax liability @ basic rate of £1,130.20

I calculate this would reduce our company corporation tax bill by £4,200. When we come to sell the car the company would take the hit on depreciation against pre tax income.

It does not seem so attractive to sell my own vehicle to the company as I would no longer be able to charge the company mileage for business use, circa £1,000 per month.

missile

Many thanks Jimmo, you have given me a lot to think about. :A

I have been charging at 45p per mile. I see I will have a tax liability per http://www.hmrc.gov.uk/rates/travel.htm

I understand that one can only claim allowance for a percentage of the value of the car per year. However, if company buys a car in year1 at £20,000 and sells in year2 for say £15,000 can one could offset the loss against income?

I would suggest our arguement would be she is company secretary and does much more than a nominal role. The car is provided as part of her renumeration package. I found the following info:

"Lower Paid" Employees
The provision of a car for an employee (NOT a director) who is paid at a rate below £8,500 per year (including the value of benefits) does NOT attract any charge to income tax. Nor is there any charge on fuel for private use provided to such employees.

So perhaps she would have no tax liability?

At the worst case I would become liable for the benefit?