Buying Decisions

westy22

Please be aware that HMRC are currently targeting the self-employed and small business owners who are artificially restricting their income specifically in order to claim tax credits. Just something to consider.

arcon5

westy22 wrote: »

As a separate, but relevant issue, your accountant should probably be advising you to take about £8,000 pa salary each. This qualifies you for automatic NI credits but without actually having to pay any NI or income tax. (slightly below NI threshold and well within annual personal allowance). Then add up to about £25,000 pa each in dividends which will not be taxed until the basic rate threshold.

This provides up to £33,000 per annum each with no NI or income tax provided of course that you have no other taxed sources of income.

Good advice. To note though the dividends are still subject to corporation tax.

Quite simply if your accountant hasn't given you this advice already, so take the full salary up to relevant threshold before drawing dividends then they need to be sacked. It's basic stuff for any accountant.

arcon5

AdrianC wrote: »

Which means less corporation tax to pay.

Aye, but like most i'd rather make £10k and pay £2k CT than make £5k and only pay half that.
The business paying doesn't necessarily result in savings, when you consider NICs etc relating to BIK. A used car dealer for example wouldn't necessarily benefit if his average stock was say a £2k car as it's all based on the original book price at new.

arcon5

westy22 wrote: »

Please be aware that HMRC are currently targeting the self-employed and small business owners who are artificially restricting their income specifically in order to claim tax credits. Just something to consider.

What rules are they breaking?
It's no different to people for example telling their employer under PAYE they won't work more than x hours as it affects y benefit. Which is quite rife is some areas.

AdrianC

arcon5 wrote: »

Aye, but like most i'd rather make £10k and pay £2k CT than make £5k and only pay half that.

...then spend £5k of after-tax money, leaving you a grand down on the whole deal?

No, it's not that simple - never is - but if the tax man is offering to pay a part, it's rude to refuse.

arcon5

There's a lot of really strange logic going on in this thread.

Firstly,

£10k profit
£2k tax
= £8k

£5k profit
£1k tax
= £4k profit

Spending more money to reduce a CT bill makes no sense unless you're not actually parting with cash, for example it's merely an allowance like the mileague rates or if it's a traditional employer paying for it and not your own company generating your own money. For example, spending an extra £5k to buy a better car, is still spending £4k MORE money, thus reducing your bottom line.

As for seeing it as the tax man making a contribution, then that's laughable.

Both get new or semi-new cars through the business and sell our current cars which should net us around £30,000 in cash collectively which will add nicely to the housing deposit and will get us on the housing ladder quicker and more efficiently which will result in a lower monthly mortgage payment which will leave us with more disposable cash in the long run and allow us to be in a better situation for life etc... Does this make sense or would we be better to carry on buying a car personally?

So you sell your current car and buy or lease new cars... raising cash from the current car, but spending loads of the companies money which would have otherwise come to you as a profit.

The bank manager will want to see your Ltd company accounts you know!! The bank will actually assess your affordability as a whole.

Spending what £6k+/year for two new cars.

If it's a vanity thing, get some private plates.

We do receive tax credits, so the way that least impacts that would be best, otherwise we may as well carry on as we are. Can someone shed any light on if my plan to get a car through the business would be better and if so, the best type scheme to take it on? We are not VAT registered but of course could be if we wish to opt into it if it will be beneficial to us and the business overall as most of the money we have incoming is from outside of the EU so VAT isn't charged anyway.

Depends.

If you sell zero rated goods then yes it would benefit. (Not excempt goods). Otherwise it's rarely a benefit, especially if it's service based product.

Example, childs clothing = 0% VAT, so you do not charge customers vat, but can reclaim vat back from other purchases from phone bill, utilities, supplies etc.
Selling standard rated products. You sell £50k =
£41667
+ £8333 goes to tax man.
You pay £25k for the goods of which £4166 is VAT you paid and can reclaim.
Net result is you pay the tax man about £4200. Of which you wouldn't have had you not been registered.


Anyway, this is all stuff your accountant can discuss with you. You need proper professional advice.

But quite simply, unless you're gonna significantly downgrade cars, it's unlikely you'll be better off to the extent you forsee by selling reasonably new cars and buying new ones.
It's unlikely you'll be a winner registering for VAT simply to reclaim VAT costs on a lease!

System

Won't be asking for any help on here again, considering I've been personally attacked.

Spicy_McHaggis

mhartley wrote: »

Thanks for all of the input. Seems personal buying would be best as I'm sure leasing through the business wouldn't allow me to claim 45p a mile would it?

I was thinking that, because then I could go on a simple £300 per month deal which would work out at £10800 over 3 years which is less than most new cars depreciate.

Make sense or not doable?

Depends on what car you buy. There are plenty cars for ten grand.

colino

Apart from what you trade in, the wise mantra is you buy things that are investments and appreciate and you lease/rent what you use up and depreciate. Cars very much are use up tools of a business and I'm sure you will get it properly set up that these two lease pool cars can be garaged somewhere handy for you.

smitchy73

You could always purchase or lease a PHEV(plug in electric vehicle) like the Mitsubishi Outlander or a Prius, and I think Ford have the Mondeo coming out. You won't pay any road tax, BIK tax is 5%, and your accountant can confirm but you can write down the full 100% in the first year, I'm sure others can advise more on this.

Leasing though saves you from worrying about the depreciation, you could do a personal lease and claim your mileage but you will pay the VAT on this, compared to off-setting the VAT on a Business Lease( I think this is how it works?? - Not sure as I'm just a normal tax payer)