Selling a car to the business

moncs

Hi,

I have a small events company which I use for football charity events.

I don't take a salary from it, however any profit has been reinvested into promotional videos, IT kit and training course.

I was looking at leasing a car through the business and selling my personal car, however I was advised that since I was not a paid employee it would not be the ideal scenario due to tax, so I wondered if I could transfer ownership of my personal car to the business and allow the business to take over the monthly payments?

TIA

happywarmgun

When you say 'allow the business to take over the monthly payments' of your personal car - what do you mean? Do you own the car outright (in which case you could theoretically sell it to your business at fair value, but you then get all sorts of company car implications). Or do you have some kind of car finance in place (in which case you probably can't transfer ownership of your car as your contract is likely against you as an individual and non-transferable).

moncs

Thanks for the reply, appreciate you taking the time.

Yes the car still has finance on it so that answer that one :-)

Pennywise

When you say "company", presumably you mean limited company. In that case, you need to research the tax and NIC payable on the taxable benefit in kind which could potentially be significant.

It's not clear from your post what your motivation is. Is it to save tax or is it to get a better/cheaper finance deal, or what? Just because the business pays for the car doesn't mean it gets tax relief on all the payments - there are complicated rules about capital allowances and also about whether some of the lease payments would be disallowed for tax.

Lots of people foul up their tax by not appreciating the rules surrounding tax relief for cars in a business.

moncs

Thanks Pennywise

Yes, its a Ltd company. The reason was simply to move the cost from a personal cost to my business as I use the car for business purposes as well as personal.

As I mentioned the ltd company does not pay me a salary, I do have a FT job elsewhere for that.

Pennywise

So you need to work out how much it will cost you in terms of income tax and NIC on the benefit in kind value against the saving in corporation tax for the company. In most cases, it costs more in tax/nic so not worthwhile as the benefit in kind tax rules are pretty harsh!

2bFrank

Does the Company have more than one employee (I know you don't take a salary, but do you pay anyone else). If so you could sell the car to the company and class it as a pool car. This way the company could also pay for the running of the car as well (finance, tax, insurance, petrol etc).

However you will only be able to use it for business purposes only, e.g. it will have to be kept at a business premises when not in use for the majority of time, the insurance has to be specific for pool/ business use etc. It also has to be available for all employees to use.

Other than that, I don't think you are going to save much money by giving or selling the car to a company, you will be smashed on tax and the added complications will be a pain as well.