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Can Director Lease Car for Daughter

Can Director Lease Car for Daughter

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I have been asked, if a Director can lease a small car (costing around £120 per month), for his daughter (either in the Company Name or in his personal name).  She works 15 hours per week in the business as an employee, and does a little travelling on company business- (not much though). 

I had been on a CPD course at some point, where it was mentioned a Director had Leased a car for the Daughter who was at university and there was some sort of tax advantage to doing this through the company?   

Can anyone advise me on this.

Many Thanks.

Replies (14)

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By Liam86
14th Jul 2014 14:43

Yes the car would then be assessable on the director as a P11D item.

I also went a course last year and I believe the jist re: tax advantage is that if the lease car is a very low emission car (i.e. lowest P11d band) then it is cheaper to pay the extra income tax on the benefit and class 1a NIC rather than purchasing/paying for the daughters car out of already taxed employment income.

Liam

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By Carolynne
14th Jul 2014 14:25

So

Thanks for the quick response Liam.

 

So does this mean that the Director takes the car out in his company name, insures it etc with his Daughter as the second driver for business and private use?  I am just trying to get my head round the mechanics of it.

 

I understand the assessment on the P11D for the Director coming to a lower amount than the tax paid on the employed income (providing it is a very low emission car),.. Plus I assume that Corporation Tax would be saved on the leased amount per annum too?

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By andrew.hyde
14th Jul 2014 14:38

'Insures it...with his daughter as 2nd driver'

Only if she is in fact the second driver.  'Fronting' is a big issue with car insurers.  Give them the full facts and make them acknowledge.

Sorry to wander off the main point, but insurance for a young driver has a big financial impact - bigger typically than any tax advantage that can be gained.

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By Liam86
14th Jul 2014 14:50

Yes

The insurance I presume would be in the company name with the daughter as a named driver.

The car lease would be in the company name. Business leases are in general, slightly cheaper than personal leases so there could be a potential saving there also.

Presuming he goes for a very low emission car the full net rental would be allowable for corporation tax purposes (i.e. no 50% restriction for high polluter's). Obviously there may be costs incurred to maintain the vehicle, as specified in particular lease agreements which I'd argue are allowable.

I'm not sure on the VAT reclaim as surely it is 100% personal use, but thats not really my area of expertise.

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By Old Greying Accountant
14th Jul 2014 15:11

I thought ...

... if they were a genuine employee and actually worked in the company it would be assessed on the daughter, not the father?

If salary and car benefit < £8500 no BIK arises, but there are other issues to consider, not least would the same benefit be available to other employees in similar roles if they were not family members.

You may want to look at this similar thread

https://www.accountingweb.co.uk/anyanswers/benefits-kind-employees-earning-less-8500

It is a very grey area!

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By Liam86
14th Jul 2014 15:14

@old Greying accountant

You are right.

I must admit I did not see the part in the OP re: the daughters hours. My apologies!

If that is the case then please follow old Greying accountant's advice.

Liam

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By Carolynne
14th Jul 2014 16:16

Briliant

Thank  all for this information, as I can now go to my client armed with all the scenarios. 

 

As his Daughter is an employee who currently does some mileage for the company.  I can see that taking the lease out in the company name, and having it as a pool car would be the best option.  Perhaps ensuring that an odd other employee drives it from time to time and records this.

 

Her salary is  £5,070 throughout the year for her 15 hours per week worked

 

However, my only thought was if she were to have it as her company car only.  I know, he would not provide this for any of his other employees.

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James Reeves
By James Reeves
14th Jul 2014 16:41

Pool car?

You'll only be able to claim it is a pool car if the daughter does not keep it at home and does not use it for private use. Doing "some mileage for the company" won't allow her to use it more than very occasionally, and then only for direct business use.

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By Carolynne
14th Jul 2014 17:12

I See

I see this now.  Basically it would be a company car insured for her use and she would have personal usage and business usage.  So the only thing the Director will have to overcome, would be the fact that he probably is only doing it this way because this employee is his daughter, and would not do this for others.  Perhaps, she should do more hours to cover the cost of the Lease and this is her way of receiving payment instead of in pound notes for the additional hours, ensuring she does not go over the 8,500 threshold.

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Portia profile image
By Portia Nina Levin
02nd May 2015 12:05

(No subject)

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By Carolynne
15th Jul 2014 15:07

More Poppycock

Thanks Portia.  The other employees do a totally different job to the daughter, and he just wants her to have a car and help her out, as I think she is a single parent and hers is clapped out.  There is only a small difference in costs between Company and Personal lease,  as it is such a low monthly amount, and as I don't have anyone with company cars (it is usually Vans) on my books, I wasn't quite sure of the way forward.  He certainly would not be leasing cars for other employees who do a different job. 

 

I wonder if you could confirm Portia that I have it right in the two scenarios before him:

 

He either Leases the car through the company, with his daughter as the main driver.  The company can claim say 50% of the lease (depending on the personal/business use ratio)  and 50% of the VAT back (is this dependent on the personal/business ratio or is it just straight 50%).

,   

(In this case would she claim 45p per mile from the company, or put fuel receipts through with a proportion is written off for personal use - or keep a mileage log?)

 

Or he leases the car for his daughter personally, and she just claims 45p per mile up to 10,000 miles, and 25p per mile thereafter..

 

Many Thanks in advance.

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By hkfinancials
15th Jul 2014 15:53

@Carolynne

If the car is leased by the company then there is no need to apportion the cost 50:50 as the tax would be paid on the benefits. Unlike a soletrader a company can not have personal use of assets and hence the entire cost of providing the car can be claimed as an expense in the company's accounts.

You can only claim 50% of the Vat even if there is only 1% personal use.

You can not claim the 45p per mile.

You can have the company pay for the fuel and pay tax on this fuel benefit. However it may be advisable to do a cost-benefit analysis before deciding on who pays for the fuel.

You are correct on the last point.

By the way, OGA did point out the other issues involved with the < £8,500 scenario.

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By Old Greying Accountant
15th Jul 2014 16:30

@ hkfinancials, thank you ...

... I did think it a bit strong insulting me then saying exactly the same but taking 20x as many words to do so :o)

Some people just don't RTFQ!!

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By Carolynne
15th Jul 2014 18:29

Cheers

I have it straight in my mind now, and thank you all for your advice.

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