Buying a low emission car - potential tax saving

supermonkey

Hi all

As a sole trader, I've previously only bought cars personally and just claimed back the mileage allowance. Someone mentioned recently about the lower benefit in kind tax for low emission company cars & whilst this doesn't apply to me, I'm wondering if there might be a potential tax saving.

This page:
http://www.bbc.co.uk/news/business-12218018
States:

Let us suppose a wife is receiving a modest salary of £5,000, and her husband - a sole trader or partner - chooses to buy her a car.

If the wife's remuneration package, including the car benefit, is under the lower limit of £8,500 per year she remains outside the scope of benefit-in-kind taxation.

As the husband is a partner or sole trader - rather than a director or employee - he cannot be taxed either, making his wife's car completely tax free.

Also:

Because of low emission levels, a company is able to write down 100% of the cost of the car against its profits chargeable for Corporation Tax in year one.

This is compared to a traditional company vehicle where a maximum of 18% per annum of the cost is allowable to write down against the profits chargeable for Corporation Tax. This is reduced to only 8% on vehicles with a CO2 level exceeding 130g/km.

Assume this doesn't apply to sole traders?

Thanks

zygurat789

Hi all

As a sole trader, I've previously only bought cars personally and just claimed back the mileage allowance. Someone mentioned recently about the lower benefit in kind tax for low emission company cars & whilst this doesn't apply to me, I'm wondering if there might be a potential tax saving.

This page:
http://www.bbc.co.uk/news/business-12218018
States:
Quote:
Let us suppose a wife is receiving a modest salary of £5,000, and her husband - a sole trader or partner - chooses to buy her a car.

If the wife's remuneration package, including the car benefit, is under the lower limit of £8,500 per year she remains outside the scope of benefit-in-kind taxation.

As the husband is a partner or sole trader - rather than a director or employee - he cannot be taxed either, making his wife's car completely tax free.
Also:
Quote:
Because of low emission levels, a company is able to write down 100% of the cost of the car against its profits chargeable for Corporation Tax in year one.

This is compared to a traditional company vehicle where a maximum of 18% per annum of the cost is allowable to write down against the profits chargeable for Corporation Tax. This is reduced to only 8% on vehicles with a CO2 level exceeding 130g/km.
Assume this doesn't apply to sole traders?

Thanks

This bit applies to sole traders and Income tax, of course and a sole trader may trade as a company.

supermonkey

Thanks,

Found a bit more info here:

https://www.gov.uk/capital-allowances/business-cars

Pennywise

The £8,500 threshold is probably going to be abolished shortly - there's been the consultation document, so the announcement is probably in this year's budget.

The "value" of the work done by the wife has to be realistic and similar to open market value, so you can't give the wife a wage "value" of £8,500 for a couple of hours per week of relatively low value work. If I remember rightly, there was a case like this where a wife was given a company car, but the costs were disallowed as business expenses because an unconnected third party employee wouldn't get a car for the type and scale of work done - i.e. it was just a perk by virtue of being the wife!

Anyway, why not just pay the wife a wage of £10,000 (if she does that much work), which will be tax free, virtually no NIC, and the husband (employer) gets full tax relief on the £10,000 wage paid. Then she could use the £10k p.a. wage to finance the car!

phill99

zygurat789 wrote: »

Hi all

This bit applies to sole traders and Income tax, of course and a sole trader may trade as a company.

Rubbish. A sole trader and a company are 2 entirely different things. A sole trsder cannot operate as a company.

zygurat789

phill99 wrote: »

Rubbish. A sole trader and a company are 2 entirely different things. A sole trsder cannot operate as a company.

I was a sole trader for many years and traded as a company.

The word you are looking for is limited, not your knowledge, but Ltd.

antrobus

zygurat789 wrote: »

I was a sole trader for many years and traded as a company.

The word you are looking for is limited, not your knowledge, but Ltd.

As far as I'm aware an unlimited company is taxed on the same basis as a limited company, and a private individual who traded through an unlimited company would not normally be regarded as a 'sole trader'.

At least not by the powers that be, that appear to regard the term 'sole trader' to be a synonym for 'self-employed'.

https://www.gov.uk/set-up-sole-trader

Pennywise

Sole trader = unincorporated personal "self employment".

Limited or Unlimited Company are incorporated entities, not personal, and not "self employment" nor "sole trader".

You're not "self employed" nor a "sole trader" if you operate via an incorporated entity, whether it be a limited or unlimited company.

zygurat789

antrobus wrote: »

As far as I'm aware an unlimited company is taxed on the same basis as a limited company, and a private individual who traded through an unlimited company would not normally be regarded as a 'sole trader'.

At least not by the powers that be, that appear to regard the term 'sole trader' to be a synonym for 'self-employed'.

https://www.gov.uk/set-up-sole-trader

I hope your awareness has now been expanded and when you see "John Smith & Co you will understand that this is either a sole trader who is self employed or a partnership of two or more self employed partners.
Sole traderships and partnerships are subject to Income tax.

CKhalvashi

antrobus wrote: »

As far as I'm aware an unlimited company is taxed on the same basis as a limited company, and a private individual who traded through an unlimited company would not normally be regarded as a 'sole trader'.

At least not by the powers that be, that appear to regard the term 'sole trader' to be a synonym for 'self-employed'.

https://www.gov.uk/set-up-sole-trader

This site set up as an unlimited company for whatever reason Martin had for doing so.

Martin was a director of that Unlimited company, rather than a sole trader.

A sole trader is not a company.

I'm director of ABC Ltd, a limited company
I'm also director of XYZ Taxis LLP, a Limited Liability Partnership
I'm also a sole trader, DEF Taxi, a sole trader using my own name.

Not so much the last any more, just when I get time.

zygurat789

CKhalvashi wrote: »

This site set up as an unlimited company for whatever reason Martin had for doing so.

Martin was a director of that Unlimited company, rather than a sole trader.

A sole trader is not a company.[/B]

I'm director of ABC Ltd, a limited company
I'm also director of XYZ Taxis LLP, a Limited Liability Partnership
I'm also a sole trader, DEF Taxi, a sole trader using my own name.

Not so much the last any more, just when I get time.

But a sole trade may be a company.
There is nothing that says a company has to be constituted as a limited liability company or an unlimited company