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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I'm a director of a company and I'm wondering which is the

Resolved Question:

I'm a director of a company and I'm wondering which is the most tax efficient way to have a vehicle. At the moment I drive a commercial vehicle but want to purchase a car. Would it be more tax efficient to purchase the car privately and charge mileage to the company or would it be better to buy the car through the company and pay benefit in kind tax?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

It really depends on they type of car you want, what its original list price is when new (even if you are buying a used car), the CO2 emissions level, the top rate of tax you pay personally and the amount of annual bsuiness mileage you. If you can give me an idea of the car, its cost and CO2 level, I'll do some calculations.
Customer: replied 2 years ago.

Merc C63 AMG, £58,000.00 280g/km. Probably buy a year old. 40%tax

Expert:  TonyTax replied 2 years ago.
Thanks.

Can you tell me what your annual business mileage is and the fuel type for the car please.
Customer: replied 2 years ago.

Annual miles 15,000 and fuel will be diesel.

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer. There is a fair amount to get through so please bear with me.
Expert:  TonyTax replied 2 years ago.

Hi again.

If you buy or lease a car privately and charge your company for 15,000 business miles annually, you will get £5,750 per annum in tax free payments (10,000 @ 45p per mile + 5,000 @ 25p per mile). The company will save 20% of that in corporation tax if it makes profits up to £300,000 per annum, slightly more its profits are higher than that, at least until there is only one corporation tax rate.

If the company buys the car, it will be able to claim capital allowances at 8% per annum on a reducing balance starting at £58,000 (see here). It will not be able to reclaim the VAT unless there is no private use of the car. If it leases the car, it will be able to claim a deduction for the lease payments and reclaim 50% of the VAT (see here).

On a £58,000 (list price when new) car with 280g/km CO2 emissions, for 2014/15 (1 November 2014 say to 5 April 2015), the car benefit will £8,676 and the car fuel benefit will be £3,246. You will pay tax on £11,922 at 40% (£4,769) and the company will have a Class 1A NIC liability on £11,922 at 13.8% (£1,645).

On a £58,000 (list price when new) car with 280g/km CO2 emissions, for 2015/16 (6 April 2015 to 5 April 2016), the car benefit will £21,460 and the car fuel benefit will be £8,029. You will pay tax on £29,489 at 40% (£11,796) and the company will have a Class 1A NIC liability on £29,489 at 13.8% (£4,069).

There is a car benefit and fuel benefit calculator here and the appropriate percentages can be found here.

I hope this helps but let me know if you have any further questions.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15763
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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