Advice for New Start Chauffeur Company

Didn't find your answer?

My client is looking to start a new chauffuer company specialising in chauffuer driven vehicles for weddings and events. He is looking to purchase a classic car and a rolls royce for the purpose and will be paying for it from his own savings as the business is brand new and hasnt yet generated its own income. 

What would be the most cost effective way to structure the ownership and running costs of the vehicle? Does he:

 

1) transfer ownership of the vehicle to the business by way of a directors loan and take out the profits as and when the business has revenue?

2) lease the personal vehicle to the company in a formal agreement in exhange for a fixed sum monthly

3) Can he as the director of the company keep the ownership of the vehicle in his name but charge the business HMRC mileage rates for use of his "personal vehicle" as and when the business has a booking for the car

Open to any other ideas if you can provide.

 

**NOTE: Business is run from home so cars would be parked outside main property although for company use only.  Please consider BIK Charge Implications too

Replies (24)

Please login or register to join the discussion.

avatar
By David Ex
22nd Apr 2024 13:35

If it’s outside your experience and knowledge, probably better to pass the client over to someone else. No disgrace in recognising your limits; no one is good at everything.

Thanks (2)
RLI
By lionofludesch
22nd Apr 2024 13:47

Apparently "chauffeur" is French for "stoker". From the days of steam powered cars.

Not helpful to the OP but, nonetheless, interesting.

Thanks (5)
Replying to lionofludesch:
avatar
By Open all hours
22nd Apr 2024 19:27

Very. Thank you.

Thanks (1)
avatar
By Roland195
22nd Apr 2024 13:53

I would suggest you & your client look at the financials & business plan for this venture before getting into the tax details.

Thanks (1)
Replying to Roland195:
paddle steamer
By DJKL
22nd Apr 2024 14:41

I concur.

Thanks (0)
By JCresswellTax
22nd Apr 2024 13:56

You have worded this like you want someone to consider all of this and give you an answer.

That's not really how it works.

I am not going to give you all the assistance and pointers so you can charge for it and I make nothing out of it. Perhaps you should pass this onto someone who has enough knowledge to make money out of it?

Thanks (5)
avatar
By Tom+Cross
22nd Apr 2024 14:05

Whilst 'free-lunches' do exist, regretfully, as JC Creswell Tax has commented, you appear to be looking for a 'one size, fits all' response, so that you can reap any rewards.

A great deal of involved work is likely (Classic Car and Rolls Royce in the mix) and you're either up to that, or you're not. Your client also needs to be made aware of the likely cost implications, to be able to move this project forward.

It's always worth knowing your own limitations.

Thanks (1)
Replying to Tom+Cross:
avatar
By Tax Dragon
22nd Apr 2024 14:10

I don't want to be accused of hoity toitiness again but I agree.

Thanks (1)
By JCresswellTax
22nd Apr 2024 14:08

"Please consider BIK Charge Implications too" - it was this bit that got me.

No, I won't.

Thanks (3)
Replying to JCresswellTax:
avatar
By Postingcomments
22nd Apr 2024 14:33

That's the final 5 marks of the exam question.

Thanks (3)
Replying to Postingcomments:
By JCresswellTax
22nd Apr 2024 14:36

I've defo failed then!

Thanks (0)
paddle steamer
By DJKL
22nd Apr 2024 14:28

Why a company?

Is there actually a viable business?

I mention this latter point as we did classic chauffeur drive for a few years, it really did not make money.

The catch was that the only hires for classics were re weddings, nobody wanted wafted from airport to meeting in a 1930s Rolls, most weddings were Saturdays so very few hires per week. We also found we needed other cars to move the wedding party, so although we had about 6 classics (already owned except the Rolls which was bought for the job) we needed more modern Daimlers as well for parents/extra bridesmaids etc, remember they cannot upstage bride so using other classics may not really be an option.

Costs can be relentless re car maint and car insurance, you then have PI cover, employer cover , garaging costs, cleaning costs and then costs re tables at wedding events trying to drum up trade/leaflets etc. (We even has models of the cars for the displays) You also must have a spare car available, a no show because of a breakdown on someone's wedding day is a disaster.

I wish your clients luck but often these things are vanity projects for the existing owner of classics rather than a true business.

I would mention that I would likely want cars in individual ownership as certainly used to be favourable tax rules if gains on the cars ensued, as sometimes classics do go up in value (but not always)

Thanks (2)
Replying to DJKL:
avatar
By Roland195
22nd Apr 2024 14:42

This is more of less what I was driving at too from my experience. I'd expect that the cowboys might be fairly well out of it but if you are trying to run a reasonably above board business you are going to struggle.

Thanks (1)
Replying to Roland195:
RLI
By lionofludesch
22nd Apr 2024 15:18

Roland195 wrote:

This is more of less what I was driving at ...

I see what you did there.

Thanks (2)
Replying to DJKL:
avatar
By Postingcomments
22nd Apr 2024 14:56

Accountants are never happier than when they are p-ing on someone's dreams! ;)

Thanks (0)
Replying to Postingcomments:
avatar
By Roland195
22nd Apr 2024 15:06

True, but it surely better for us to do so now than after they have sunk their life savings into it?

They have family, friends & Business Gateway to cheerlead for them - someone has to be realistic so might as well be us.

Thanks (2)
Replying to Postingcomments:
Stepurhan
By stepurhan
22nd Apr 2024 15:15

Postingcomments wrote:

Accountants are never happier than when they are p-ing on someone's dreams! ;)

Better to p on someone's dreams then let them p all their money up the wall with a non-viable business. :-)
Thanks (5)
Replying to stepurhan:
RLI
By lionofludesch
22nd Apr 2024 15:37

stepurhan wrote:

Postingcomments wrote:

Accountants are never happier than when they are p-ing on someone's dreams! ;)

Better to p on someone's dreams then let them p all their money up the wall with a non-viable business. :-)

Ach - I don't know. Chauffeur companies/businesses are for vintage car enthusiasts who want to earn a few quid to finance their hobby, aren't they? Nothing wrong with that.

Thanks (0)
Replying to lionofludesch:
Stepurhan
By stepurhan
23rd Apr 2024 08:56

lionofludesch wrote:

Ach - I don't know. Chauffeur companies/businesses are for vintage car enthusiasts who want to earn a few quid to finance their hobby, aren't they? Nothing wrong with that.


So it's a hobby and not a genuine business then. Don't let HMRC know. ;-)

Sometimes advice is about achieving a desired goal that isn't about saving tax or maximising profits. If that's what someone wants to do, then a good accountant should be able to advise accordingly.

Thanks (0)
Replying to stepurhan:
RLI
By lionofludesch
23rd Apr 2024 09:19

stepurhan wrote:

So it's a hobby and not a genuine business then.

This particular case?

No idea.

Thanks (0)
Replying to lionofludesch:
Stepurhan
By stepurhan
23rd Apr 2024 10:46

I appreciate you don't know in this particular case. Just highlighting the additional potential pitfall you had raised.

Thanks (0)
Replying to stepurhan:
RLI
By lionofludesch
23rd Apr 2024 11:00

It's a heads-you-win-tails-I-lose scenario.

If it makes a profit, HMRC will tax the profit; if it makes a loss, HMRC will say it's not carried out on a commercial basis.

Always fairly straightforward once you have the accounts.

Thanks (0)
Replying to Postingcomments:
paddle steamer
By DJKL
22nd Apr 2024 15:40

No- we just look at projects with eyes wide open.

If, once data considered, they want to proceed then fine, but raising these points, applying general business understanding, is what accountants were always renowned for doing, if accountants want to be mere reactive compliance factories, fine, their choice, but that was never my approach; of course the longer in the tooth the more experience is brought to bear. (if it can still be remembered)

In this case client has to consider what is realistic for bookings, they should maybe do some research as to frequency of weddings by day of the week to check if their projections jar with reality (talking with say hotels/vicars etc at a local level, maybe checking anything published re dates local registry office then finding some national stats at a UK level etc)

We were guided on the booking frequency point by a former director of a large Chauffeur Drive operation in Glasgow, he pointed out that our model would not work, catch was my employer wanted to do it so carried on losing money in the process for a few years. (not much but if no free accountancy input from myself likely a fair bit more if prof fees had needed to be paid)

Thanks (1)
VAT
By Jason Croke
22nd Apr 2024 14:30

Why would there be a BIK?

Why is Director buying an asset that is going to be used exclusively in a Ltd?

Why would Director want to keep the vehicle under personal ownership?

Often with tax planning, you start with the "Why" and the rest will flow from that.

Thanks (0)