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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15916
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I own a limited company, the nature of the business is a

Customer Question

Hi, I own a limited company, the nature of the business is a conveiniance store. For the last couple of years I have used my own car for cash and carry, banking, general errands etc. I am now however going to contract hire an estate car through the business, which I have discussed with my accountant. He even said I should only claim half the vat back as I would be driving it for personal reasons sometimes (like driving it home after work) and this would keep the taxman off my back. However a friend of mine has said that this is completely wrong and that you can't lease cars or estates through a limited company and if the taxman finds out I will be heavily fined and incur penalties. He thinks I should cancel the order. Can you please help
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.

Hi.

Let me take a look at this and I'll get back to you.

Expert:  TonyTax replied 1 year ago.

Hi.

Your accountant is correct and your friend is wrong. Thousands, if not millions of business owners lease vehicles for business use. How does your friend think employees drive company cars? Read about claiming back VAT here.

The problem you do have is that an estate car is a car (its not a commercial vehicle) and, if it is available for private use there you will be taxable personally on a car benefit. If all the fuel costs are met by the company, you will also be taxable on a fuel benefit. The company will also have a Class 1A NIC liability at 13.8% of the combined car and fuel benefits. Use the car benefit calculator here to work out the potential tax charge on company car and fuel benefits. Even a van used privately comes with taxable van and fuel benefits.

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

Customer: replied 1 year ago.
Hi,Thanks for the help I understood most of that however I am quiete new to business and this is a little hard to get my head around. But what I understood from what you wrote is that it's ok to do, nothing illegal. However I will be personally liable for tax. Firstly just for having the car then secondly through the petrol, after using the tax calculator this is quite a lot of money and if I knew this before hand I may not have gone down this root. I am willing to pay for the fuel personally as its not going to be driven a lot which I imagine should bring the tax cost down a little but the personal tax is still a lot.Is it an option to claim 100% of the VAT and only use it as a company car and leave it at the business overnight and only use it for business purposes??Or now that you know my circumstances is there a more tax efficient way of getting this vehicle for the business???
Expert:  TonyTax replied 1 year ago.

A more efficient option would be to lease a commercial vehicle, not a car.

If an employee doesn't want the car benefit, they can ask their employer to give them a written instruction banning them from using the car for private trips. Private trips includes the journey from home to a fixed place of work and back again. However, an individual running their own company will find it hard to convince HMRC that they have banned themselves from using the car for private trips. If you have another car which you can use for private mileage, then you could try leaving the estate at the business address overnight and claiming that its not a company car to avoid the car and fuel benefits. A car only has to be available for private trips to trigger the car benefit. You would have no problems if you leased a van and didn't use it privately.

Customer: replied 1 year ago.
Hi,I do have 2 cars currently in my household my wife's golf and my Astra, I could leave the car at work overnight which has secure parking and cctv cameras to prove that, that is the case. Would that be ok for HMRC or would it still be a case of me trying to convince them otherwise???Also, apologies if this sounds stupid but you said in your last response that if I had another car I could leave the leased car at work and claim its "not" a company car. Am I misunderstanding something, if it's not a company car what am I claiming it is ??
Expert:  TonyTax replied 1 year ago.

What I meant was that you may as well try to claim its not a company car, ie an employee/director benefit car, is used purely for business and leaving it at the business premises especially if its secure. Nothing ventured, nothing gained. Having other cars will help in that regard. It might help if you can insure it for business use only.

Customer: replied 1 year ago.
Ok thanks for the help
Expert:  TonyTax replied 1 year ago.

Thanks.

Would you mind rating my answer before you leave the site please.

Customer: replied 1 year ago.
Hi,I am going to do that rating now which has been fantastic but sorry just one more thing. I've just been on the tax calculater again and I think I may have made a mistake and misread the results at the top of the calculator which said car benefit charge £7500 and fuel benefit charge £5500. Which as you can imagine gave me a heart attack lol. But now that I have read the whole thing it says at 20% tax rate it will be company car tax £1500 and company fuel tax £1000 which is much more acceptable. Is that correct if I go ahead with it as we discussed and pay both benefit taxes it will be the £1500 and £1000 and not the charges of 7500 and 5500?
Expert:  TonyTax replied 1 year ago.

The benefits may be £7,500 and £5,000 depending on the car but you only pay tax on those at your top rate of tax which isn't 100%. However, the company would also have a Class 1A NIC liability of £1,794 (£13,000 @ 13.8%). If I were you, I'd use the new car for business trips only and leave it at the premises overnight.

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Customer: replied 1 year ago.
Hi again,I have rated ur feedback 5 stars, I'm sorry if this is a new question I'm willing to pay again if so, but could you tell me if there is anything else I would be liable for, my friend is convinced if HMRC ever got involved there would be benefits in kind and other things, I think he's had some personal experience with it himself. He seems to think shopkeepers can put cars through a business if they are T/A but if you are a limited company it's extremely trickyThanks
Expert:  TonyTax replied 1 year ago.

As far as I'm concerned, so long as you don't use the estate for private mileage, you should be fine. Ownership of other cars helps. As I said earlier in the is answer, a van would be better.

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