Renting car under Ltd company?

Dummie_2

Hello There

DH and I are directors of our own company. We have a Ford Fiesta that we have just finished paying off.

DH is keen to sell off the Fiesta and rent a bigger car under our company.

Is it as simple as selling the Fiesta, pocketing the money (around £3,000) and then having the company pay for the rental of our chosen car? Surely there's more to it than that? I think renting includes servicing, MOT and car tax so we won't have these expenses.

It seems too good to be true but I'm sure we're missing something:rolleyes: . Can someone offer any advise and their opinions please.

Much appreciated.

Andy_L

Would it not be a taxable benefit, like any other company car

dejongj

What kind of legal entity are you? Who owned the Fiesta actually? Will the hire car be stored at business premises or also used for personal use?

Dummie_2

The Fiesta is owned by us. Under my husband's name. The contract hire car will be stored at our home address as we work from home. Yes the car will be for personal use also.

Sorry, but I don't understand your question re what kind of legal entity are we?

Thanks in advance for your help and advice.

Bean_Counter

I agree with Andy L. Depending on the level of remuneration you pay yourselves, you will more than likely end up with a taxable benefit.

I guess it is a simple exercise of working out the advantage of the tax deductibility of the contract hire costs against the tax costs of the benefits. Don't forget that depending on the type of contract hire and the value of the car, not all the payment are tax deductible. Also don't forget the Class 1A NI on the benefit.

It might be more worthwhile to own the new car privately and claim back the 40p per mile etc tax free.

missmoon

If the rented car would have cost over £12,000, not that not all of the rental expense can be deducted from your profits. Part of it is not allowable. The allowable expense is:

£12,000 + price x rental
2 x price

s.48(2) ITTOIA 2005.