Buying a commercial vehicle through a limited company

STurner · 11 April 2018 at 12:01PM

We run a small Limited Company and have just bought a Toyota Hilux for the business. It's classed as a commercial vehicle so I'm thinking it will be most tax efficient to buy and run the vehicle through the company. Here are my assumptions for the annual running costs:

Car cost: £16,900
Insurance, tax, servicing etc: £880
Mileage: 3,500 business miles, private miles 2,500

I know that we will pick up an income tax payment on the benefit and a NI contribution through the company totalling £1,346.25pa. We are not VAT registered and pay the lower income tax rate. Will the benefits of writing the costs against profits, reducing corporation tax and not paying for it privately through taxed income outweigh this?

My accountant isn't being too clear about this!

Many thanks
Sarah

Pennywise · 11 April 2018 at 12:57PM

STurner wrote: »

My accountant isn't being too clear about this!

Probably because it's fiendishly complicated to work out which option is better.

How are you paying for it? HP, lease, company bank account or personal monies?

How long will you keep it? 3 years, 5 years, 10 years?

Is your company VAT registered?

You have to look at things like the tax cost of taking the cash out of the company to buy it personally, i.e. dividend tax.

A very, very general rule of thumb is that "vans" are better bought through the company, but there are times when that's not true.

STurner · 11 April 2018 at 1:22PM

Thank you.

We have bought it with personal money, will hope to keep it for 5-10 years, we are not VAT registered...

Pennywise · 11 April 2018 at 1:47PM

So, assume 10 years. Cost £16,900 less eventual PX say £2,500, so net cost £14,400. Annual costs say £1,750 p.a. so £17,500 over 10 years. Total costs £31,900. Corporation tax relief at 19/17% due to putting it through company say £5,900 in CT saved.

Compare that to £1,346 tax/nic p.a. on benefit in kind for 10 years £13,460, which WILL increase each year so will be higher.

So, you can see it will cost you £7,560 due to tax/nic being more than the corporation tax saving.

And that's just very simple calculations which you could fine tune to compare with owning personally and charging company for mileage.

You only get CT relief on the purchase once, where the benefit in kind will just grow each year.

chrismac1 · 13 April 2018 at 2:32PM

Some other things to consider. The DVLA either has this vehicle down as in the name of the limited company or it does not, if it does not then running it through the company is not an option as it is owned by one of the directors.

However, if it has been bought by the company then there is not necessarily a beneift in kind. If this vehicle is only used for business journeys, as your post suggests, then the benefit in kind is zero. Note for anyone reading this who has a company car the rules on a car are very different, a benefit in kind (BIK) arises as soon as you put it on your drive at home whereas with a commercial vehicle only personal mileage counts towards the BIK

PeteSBC · 18 May 2019 at 1:45PM

Hi - I run three small businesses. A brewery (ltd co), a property letting business (unlimited) and am a lawyer (ltd co). All three operate within the same premises which is a mixed use business complex.
I am wanting to buy a commercial vehicle for use by the brewery and property business for deliveries and collection of building equipment. I would also consider using it for personal use.
I would like to buy an electric van.
Any advice/approach to look into this.
Thanks

Buying a commercial vehicle through a limited company

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