Limited company and director's personal contract hire payments

Limited company and director's personal...

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We have a new client, limited company, where the director has taken out a personal contract hire for a vehicle that they will be using for some business and some personal usage.  The company is relatively recently incorporated company and hence when the director enquired about business contract hire, this was not possible, as the business did not have a high enough net worth.  Therefore, he was left with the only option of taking a vehicle through a personal contract hire.  However, the director will be using the vehicle for approximately 75% business, and 25% personal.  Is it allowable for the limited company to treat the director's hire costs as a company expense, as if it was a business contract hire, and thus repay the director for the hire costs that they are incurring?  Any advice would be greatly appreciated. Please let me know if you need any further information.

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By Stuart.thomson
17th Mar 2015 21:35

There is nothing stopping the company picking up the costs of the contract hire as a form of expense claim. The director has the power to approve this (unless his powers are limited to needing more authority for this sort of thing). However it is a question of whether this is what happened. Has the company agreed to pick up this cost or just paid the directors personal costs?

If the company has picked up the bill then I think you need to ask under what terms. Is the company renting it from the director for say his company usage in which case the director "may" be self employed in renting cars! Or is it just an simple company has paid for the availability / usage of the car in which case BIK will apply. My guess would be BIK.

Unfortunately I have yet find a way round the anti-avoidance rules for cars. But if someone has a scheme please let me know as I am looking for a new car.

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Replying to JAMAccounting:
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By Quicksilver
25th Mar 2015 11:29

Company paid for usage, hence BIK

Many thanks for our response, greatly appreciated.  The company has paid for the usage, so there will be a BIK.

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