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Can BIK on mixed-use assets be repaid to not be BIK?

Can BIK on mixed-use assets be repaid to not be...

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My small ltd company has a small number of assets that come into the mixed business/ personal use category in ratios between 90% and 50% business use and I have 2 main questions in relation to that.

1.a. Is there any ability to and if so any advantage or indeed disadvantage to me personally paying the company the BIK equivalent so that there is then no BIK (and no need to make a P11D declaration?)?

1.b. If that ability does exist, then how is that “payment” treated, company income – if so then presumably it is subject to possible corp tax?

2.a. On, for example, a motorbike I know that a figure of 20% of capital expenditure + yearly expenditure is used before applying the business/personal split. Why 20%? Is it 20% on all other similar (non-car items)?

2.b. Does this continue to run at 20% after 5 years – I believe it does. If so, is there a loss of tax advantage after those 5 years? Would it be “better” to dispose of such a mixed-use asset before/at 5 years? What if you wanted to continue to make both/ use after 5 years is there a better approach?

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By George Attazder
12th Mar 2012 12:08

It's complicated

Your question remains unanswered because it's actually quite complicated, which means that it involves an amount of effort in responding to it that's entirely disproportionate to the fee that you've indicated a willingness to pay.

You can make a payment to the company to eliminate the net benefit of the personal use. It's not advantageous from a tax point of view (where's the money ultimately going to come from that you're going to pay into the company - out of the company and you'll pay tax on it), but if it reduces the benefit to just the non-taxable business element, then there won't be any Class 1A NIC on it, although I'd still say it was strictly reportable on form P11D (the business element is still considered a benefit, but you get a corresponding expense deduction).

Class 1A NIC for mixed use assets is a complex area. You either don't pay any or you pay Class 1A on the gross (including the business element) of the benefit.

It's 20% because the legislation says so, but it says more than that, so 20% isn't necessarily the right final answer. It's 20% for any asset for which there isn't a specific provision (eg cars, living accommodation).

Yes, the 20% (if that's the right answer) goes on ad infinitum, while the asset continues to be made available. If ownership of the asset transfers to the individual, you often take original cost/MV less all the 20%s suffered so far, so the "normal" trick is to transfer the asset to the individual at the end of year 4 (year 5 benefit is the same amount that it always was, but now relates to transfer of the asset). 

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By whopkinscom
12th Mar 2012 13:32

Thanks for the reply George, and to labour a point I don't see any reference to any willingness to pay or not pay any fees in my question. At least I know now it's a complicated one - which I genuinely didn't when I posted it, I didn't know at all. Thanks again though for taking the time to give me some information which I can research further and if I feel I need the benefit of paid advice I will then consult with the accountant with whom I have a time spent fee charging basis as I do my own accounts and don't need to engage an accountant on an ongoing, day-by-day basis, consulting him the few times I have when I've been really stuck and paying him for his time.

Regards from one small businessman to another,

Will Hopkins.

 

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