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bigduckontax
bigduckontax, Accountant
Category: Tax
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I own and run a small limited company and have some rental

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Hi Pearl, I own and run a small limited company and have some rental properties and want to buty a company car. can you help with that?
JA: Have you talked to a tax professional about this?
Customer: Vaguely but I didn't get clear answers, that is what I am looking for now.
JA: Anything else you want the Accountant to know before I connect you?
Customer: I can confirm finer details directly.

Hello, I am one of the experts on Just Answer and pleased to be able to help you with your question.

 

What exactly are you trying to do?

Customer: replied 8 days ago.
Hi,I notice all there drop downs relate only to Canadian and US tax. Are you able to advise on UK tax?
Customer: replied 8 days ago.
No I don't want to call for £44. I'm trying to save money here not spend it!

I am an UK accountant. Many users of JA are located in the UK.

Customer: replied 8 days ago.
Hello, do I get any response other than a request to make a phone call?
Customer: replied 8 days ago.
Hello?

I have already asked you to expand upon your original question.

Customer: replied 8 days ago.
Please stop sending the phone call request.

I cannot do that, the Just Answer system does that automatically.

Customer: replied 8 days ago.
OK, I'll proceed. I have a small limited company and some rental property, my total income is £50k. I want my company to buy a car for me that has a BIK rate of £13,000. I am happy to pay 20% tax on that but not 40%. Is there a way?

Have you considered making a contribution to a pension fund to reduce your overall tax liability?

Customer: replied 8 days ago.
My company already pays about £40k (which I think is the maximum) into a pension fund for me, The salary I take is only about £13k, the rest (£37k or so) is rental income.

You can go back up to 3 years to mop up unused contribution levels.

Customer: replied 8 days ago.
My pension has been in place at least that long. Are there any other contribution levels I could mop, or means of getting money out of the company without increasing my liability?

Apart from reimbusdement for expenses I cannot think of any.

Customer: replied 8 days ago.
Its more an on going solution I'm looking for than a one off reduction. Could there be another way of acquiring the vehicle? what if I were to make a personal capital contribution to it?

Cspitsl Allowances (CAs) on cars are very complex these daya. What sort fo vehicle are you considering.

Customer: replied 8 days ago.
A hybrid electric car with a P11D of £115,000. that emits only 47g/km and has a range of 37miles on electric only. for 20/21 that dictates a BIK rate calculation of 12% of the p11D value of the vehicle which is where the £13,000 (ish) BIK Value came from. I have a handle on all that. just don't like the fact that all of that £13k would be in the 40% bracket ... every year, garnering a tax bill of over £5000. I would like to find a some way of paying tax on that £13k at 20% without reducing my income by the same amount.
Customer: replied 8 days ago.
Or at least, perhaps the income would appear to be reduced by that amount as it was being extracted via an alternative route but I end up with it either way.

As this vehice is being bought on the company your personal tax would be charged the BIC percentage. However, for this car the first year allowance at 100% could be claimed through capital allowances.

Customer: replied 8 days ago.
Does that assume it is a new car? The company would be buying it second had for only £40k.
Customer: replied 8 days ago.
I do not have clear understanding of capital allowance. Is it still applicable if the car is not bought new?

It applies to all capital items acquired for business purposes.

Customer: replied 8 days ago.
Could you explain that a little please.
Customer: replied 8 days ago.
How does it work?

You are allowed a capital allowance of 40K in the accounting year the vehicle is bought which is set against tax in that year.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 8 days ago.
Does this mean that the full £40k purchase by the company offsets £40k's worth of corporation tax @20% saving the company £8,000, effectively reducing the overall outlay by that amount to £32,000?
Customer: replied 8 days ago.
Or (reading back through your previous messages) does that allowance apply to me, rather than the company? or both?
Customer: replied 8 days ago.
I'm just getting to the bit where I might learn something. Are you still there.
Customer: replied 8 days ago.
Hello. I have to leave in 5 minutes. Any chance of a response before then?
Customer: replied 8 days ago.
You haven't answered for 15 minutes.
Customer: replied 8 days ago.
Any chance of letting me know if you are still there or not?

It depends who bought the car, you or the company.

Thank you for your support.

Customer: replied 8 days ago.
The company is buying the car.

Then the company gets the capital allowance. This does not necessarily have to be claimed in thr year of purchase, but part can be deferred as convenient.

Customer: replied 8 days ago.
Please confirm the mechanism and effect of the capital allowance. Is it that the full £40k purchase by the company offsets £40k's worth of corporation tax @20% saving the company £8,000, effectively reducing the overall outlay by that amount to £32,000?

Well, yes and no, the current rate of Corporation Tax (CT) is 19%, 18 % from next April.

Customer: replied 8 days ago.
Ok so the structure of the calculation of capital allowance was correct, just the percentage was wrong? so it would be a £7,200 tax rebate after April. Is this the same as 'writing down allowance"?
Customer: replied 8 days ago.
Does the amount claimable depend on the Co2 emissions of the vehicle?

Well sort of, but most capital allowances are Annual Investment Allowances at 100%; cars bo not come into those though. the amount of allowance varies with the carbon dioxide emission levels.

Customer: replied 8 days ago.
I do not belive my car would be eligible to 10% first year allowance as it is not being bought new and it doesn't appear to be eligible for Main rate allowance as it is not solely for business purposes. As per :

Main rate allowances
Unlike the FYA, both new and second-hand cars can qualify for the main rate WDA, as long as the car is being bought for business purposes only.

Cars will be allocated to the main rate WDA pool if they were bought after the 1st of April 2015 and before the 1st of April 2018 with C02 emissions of 130g/km or less.

If the car was bought after 1st April 2018 but before 1st April 2021 and has C02 emissions of 110g/km or less, it will also be allocated to the main rate pool WDA.

So under what scheme will my car get an allowance and where do I calculate how much?

Thankyou for your help so far.
Customer: replied 8 days ago.
By 10% I mean 100%
Customer: replied 8 days ago.
Is this what I would do: 'Single asset pool'
If your car is used for both personal and business purposes it must be allocated to a single asset pool. The amount that the car is used for personal journeys is taken into consideration and the allowance will be reduced to reflect this. Depending on the car’s C02 emissions the allowances are calculated at a rate of either 8% or 18%.

Yes, the car would from a single asset pool.

Customer: replied 8 days ago.
Great. So what does that mean? The internet is being vague. Can you clarify what the outcome of a "single asset pool would be if my company buys me a £40k used car with 47g/km emissions? I have also searched for "calculate writing down allowance for company car", but no calculators are forthcoming.
Customer: replied 8 days ago.
Now I read that I could only put a car in a single asset pool if I am a sole trader or partner , but I am an owner director.

That is not surprising because there is no writing down allowance as it can be written off in one tranche unless it is more tax efficient to spread it over subsequent accounting years.

Customer: replied 8 days ago.
I'm lost. How can it be written off in one tranche, under what mechanism if it is not eligible for First year allowance because it is new?
Customer: replied 8 days ago.
(not new).
Customer: replied 8 days ago.
Please clarify as there seem to be contradictions.

Most business capital items are written off at 100% through the Annual Investment Allowance (AIA), motor vehicles are an exception and go into a pool.

Customer: replied 8 days ago.
We know that a car is not eligible for AIA so we don't need to mention that. I thought pool cars had to be available for multiple employees. This car is just for me and apart business , part private use. How will the tax and allowances on that be calculated?

From mileage records showing business and personal use.

Customer: replied 8 days ago.
what is the calculation please?
Customer: replied 8 days ago.
Does a pool car have to be available to more than one employee?

Not necessarily.

Customer: replied 8 days ago.
What is the calculation please?

Depends on the mileage from which can be derived a percentage use.

Customer: replied 8 days ago.
Please. I am looking for the sum to which I apply my figures. What is the sum?

I cannot tell you without the mileage records. If you did 2000 private and 5000 miles business then just over 70% of vehicle costs would be allowable.

Customer: replied 8 days ago.
So we are mixing up purchase costs and running costs now? I need to know what the sum is to calculate the allowance on the purchase of the vehicle. you state that the company can claim 100% but the internet seems to think that is only for new cars.

Not according to the Gov UK Web Site where no such restriction is mentioned.

Customer: replied 8 days ago.
OK. Thankyou, for your help. I'll do more research and return. Goodnight.

I am off to bed too.