Limited company buying a car

Limited company buying a car

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What do you think is currently the best option for purchasing a vehicle if you are a director of a small limited company, drawing a small salary?
Purchase privately and claim mileage
Purchase outright by company, claim capital allowances, benefit in kind implications?, (not vat registered)
Hire purchase and claim capital allowance, tax relief on the interest paid
Or Lease and claim tax relief on whole payment

They have the capital to buy outright through company or privately if it was the best option.
I know the lower the co2 emissions the cheaper any of these options are.

It's been a while since I've advised on this and I'd like to check I've covered all angles.

Thank you

Replies (6)

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By duncanedwards
01st Sep 2014 19:45

To be honest
It depends entirely on the specific circumstances. The answer for your client will require you to do some modelling.

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By Phoebe212
01st Sep 2014 20:21

Thanks Duncan, I can investigate this further using their particular circumstances tomorrow, I just wanted to ensure I'd covered all the potential implications of each option before doing this too? If both directors use the car (husband and wife) is the bik split between them? Just want to make sure I'm not missing anything

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Replying to carnmores:
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By duncanedwards
01st Sep 2014 21:03

Some sense

Phoebe212 wrote:
If both directors use the car (husband and wife) is the bik split between them?

That I don't know.  Absent any relieving provision, is there a possibility that they both get a full benefit?

 

Edit: Some common sense prevails:

http://www.hmrc.gov.uk/manuals/eimanual/EIM25200.htm

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Teignmouth
By Paul Scholes
02nd Sep 2014 01:22

Rules of thumb

Hi - I agree that you do need to visit http://www.hmrc.gov.uk/cars/ and do some spreadsheet work or find an online calculator somewhere to do some what-ifs, but in all but one case (me) in the past few years it has worked out better for the person to use their own vehicle and claim the mileage rate.

If the car is relatively cheap to run in servicing & fuel then the 45p can actually make you money as it's based on average sized cars and so, when I used to run a Smart Car I nearly made back the cost of the car in 3 years.  You are right though, low emitting cars do result in the  lowest company car benefit rates (the one I run at the mo) but these rates go next tax year, so you need to build this in to the calculations.

At the other end of the scale, in the case of an expensive car with heavy running costs, especially in say servicing and insurance, letting the company suffer the costs and claiming them and the capital allowances against Corp Tax, can work out better than the person having to draw higher salary or dividends to provide them with the cash to pay them, over and above the 45p they get.

 

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By Captainblack
02nd Sep 2014 07:17

This website is useful

www.comcar.co.uk

Here you can model all sorts of tax implications with company cars.

Captain

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By Phoebe212
02nd Sep 2014 21:25

Thank you, all very useful

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