Ltd company buying a vehicle?

irfb87

Hi guys,

Myself and my partner formed a ltd company when we took on a hotel. We live in and run the hotel and employ a few members of staff..

My car (from my previous life before becoming a director, or hotel owner) is an estate car, which really is not practical for picking up furniture, shifting furniture etc, and whilst it is a 'hotel owned and run by a ltd company' it is by no means a heavily funded set up and so actually cutting costs by doing heavy lifting and delivering is currently a necessity.

So that brings me onto my next question, we're looking into flogging my estate, and purchasing a van in the company name, good idea? The two I've lined up are 08 plate transits both under £6k.

I'm not concerned about it being a company vehicle in the sense that we live on site, so it would be left on site and currently there is very little we do that doesn't involve the company - every small journey we make can be either a food run, or look at a furniture place, interior decorators etc etc. But I've been baffled by things like CO2 emmissions and their relation to companies and what sort of position we'll be put in.

I would run a lot of this past my accountant, but as it's a bank holiday weekend, he won't be working until Tuesday at the earliest...

I'm just wondering if any of you can help advise on any of the points I've raised and whether you think it's worth it or not..

irfb87

Sorry all, one other reason for this sort of question is that at the moment ourselves and the ltd co. are more or less one and the same, because we live in the building there is small outgoings from each of us individually and because we're in the start up process and refurbing, renovating etc etc, we're trying to keep our individual spending to a minimum - therefore we don't require much 'pay', therefore the company has more money to spend on renovation...

Sooo.. that sort of the direction my question is, it's not so much of about claiming back tax, etc, because I know I can charge my company 45p a mile for mileage in my car, however as with the above, we're trying to keep as much money in the company as possible...

phill99

I'm not sure what you're asking.

In my mind, if you need a van, just buy one.

I have had second hand vans for all of the time I have been in business. In december I bought a brand new van, part cash and part financed. It has been far more tax efficient to buy a hew van than a second hand one and it has much lower running costs than a new one ie, no servicing, repairs or MOT for three years.

irfb87

Hi there,

apologies for not being clear...

I suppose I just don't know whether it's beneficial for me to buy it, or the company...

2 options:

I withdraw money from the company account and buy a van.

or I transfer money, mark it as a payment to me, then I buy the van.

The positive with the company buying it, is that if there are MOT's due, work to be done, etc etc, I can claim back the vat (we're vat registered) - whereas as an individual with my own vehicle, I have to cough up the vat money.

As for buying new, the problem is the large outgoings and monthly payments, we're very new at the moment and we'd rather just try and go for the one off payment at the moment, then in a few months when we're multi gasquillionaires, we'd look at a new van...

Marktheshark

Are you VAT registered if not you will have £6000 x 20% to cough up just for VAT if its bought in the company name.

irfb87

Marktheshark wrote: »

Are you VAT registered if not you will have £6000 x 20% to cough up just for VAT if its bought in the company name.

Hi Mark,

We are vat registered, so I know we'd be able to claim back vat, however there is no vat on the van.... so I thought we could just buy it as it is...

neilmcl

Have you considered leasing a van through your company?

phill99

irfb87 wrote: »

Hi Mark,

We are vat registered, so I know we'd be able to claim back vat, however there is no vat on the van.... so I thought we could just buy it as it is...

You are correct. Marktheshark is incorrect. Its the seller that applies (or not) the VAT subject to their VAT status.

Why on earth would you buy the van as opposed to your company? The minute you take the cash out of your company YOU have to pay income tax on it. You are then unable to get the Corporation Tax Relief on the van as it isn't bought as a company asset. Therfore, you effectively pay tax twice. Then the longterm costings: you can't recover the vat on fuel, oil, servicing, parts, signwriting etc. Nor can these be set against corporation tax. Plus if it is a personal asset, then you have to pay for servicing etc out of your taxed personal income which means again, you are paying tax twice (infact three times because of the VAT situation). If you bought new kitchen equipment, ypu wouldn't buy it as a personal asset would you? A van is exactly the same.

This really is a no brainer. Your company buys it - not you.

Get your accountant to go through it with you. Please don't tell me you don't have an accountant?

Car_54

If you don't buy it through the company, then presumably all the ongoing costs (depreciation, insurance, servicing, VED , fuel, etc.) will have to be borne by you as an individual and then reimbursed as expenses by the company. That's an awful lot of admin for no gain.

So far as I can see, the only downside to the company buying the vehicle is that any private use by you or any other director or partner has to be declared as a benefit in kind. From what you've said, that shouldn't be a big issue.

neilmcl

Also something to bear in mind. Vans are not treated in the same way as company cars, they are classed as plant & machinery rather than vehicles. You can offset the full amount of a van purchase against that year's profits and you can also reclaim the VAT, although you will have to charge VAT should you then sell it on. CO2 emissions don't really come into it (unless of course it has zero CO2) as there is a flat rate for BIK and fuel, nut only if your salary is over £8,500 a year.

More details here: https://www.gov.uk/expenses-and-benefits-company-vans but I'm sure your accountant will be able to give you all the relevant details.

londonTiger

the slightest personal use of a company van can trigger a £3000 benefit in kind.