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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15950
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Can anyone help? - If my company purchased a car

Resolved Question:

Hi, can anyone help? - If my company purchased a car for say £40,000.00 and sold it to me an employee for say £100.00 so I own the car and do not get taxed on it, is this legal?
Also If they then paid maintenance on the car and insured it, would this have an implication?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

If you are sold a car by your employer at a discount to its value, there are tax and national insurance implications for you as the employee and for the employer as you can read starting here.

If your maintenance and insurance costs for the car are settled by your employer, again there are tax and national insurance implications.

These benefits should be reported in a P11D. If HMRC conduct a PAYE audit then it will come to light if they aren't reported and there could be significant financial penalties.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

Hi thanks for this.

Can you advise on the approx tax / NI costs on the following then:?

Company buys a car for £40,000.00 and sells for £100.00 to and employee earning £60,000.00 basic.

Company maintains the car up to a cost of £2,000.00 p/a.

Thanks

Expert:  TonyTax replied 2 years ago.
Assuming the car was sold to you as soon as the company bought it, there will be a one off benefit of £39,900 on which you will pay income tax of £15,960 (40%). The company will have a Class 1A NIC liability of £5,506.20 (13.8%).

Assuming the insurance is in your name and the maintenance bills are in your name, the sums paid directly or reimbursed to you should be put through the next payroll run and subjected to tax and NIC. You will pay tax on the £2,000 of £800 (40%) and employee NIC of £40 (2%). The company will have a Class 1 NIC liability of £276.00 (13.8%). Take a look here for more information on pecuniary liabilities.
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Expert:  TonyTax replied 2 years ago.
Hi again.
It's been a couple of days since I answered your question. Is there anything you need further clarification on?