Can Ltd Co lease a car from a director?

One of my clients has bought an electric car on PCP.

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A director of one of my clients has bought an electric car on a PCP scheme.  They are wanting their limited company to pay the monthly finance cost and for it to be treat as a company car.  They are willing to give up some of their monthly salary towards the cost and pay BIK for the rest of the payment.  Is this possible and if so how would I account for it?

Replies (8)

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By paul.benny
12th Sep 2022 12:42

The PCP provider may prohibit sub-leases.
The insurance may not be valid -depends whether it is in name of Director or Company.
By leasing personally, there's VAT that Company cannot recover.
If Director is leasing car to Company, the s/he will have to include the income and expenses on their SATR.

Apart from those things, all fine.

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Replying to paul.benny:
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By Jo Wood
13th Sep 2022 16:41

Thanks Paul,

The director is willing to give up part of their salary towards this but I've spoken to them about the personal tax implications

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By Tax Dragon
12th Sep 2022 13:00

The main reason PCP is cheaper is that the tax savings aren't there.

To Paul's excellent comment, I would add... any agreement between the company and the director that the PCP provider does allow will have to create a genuine company liability, else all you have is an employer paying an employee's bills.

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Replying to Tax Dragon:
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By Jo Wood
13th Sep 2022 16:45

Hi,

I think they thought that it could be as simple as the company paying it on their behalf which would increase the companies yearly expenses for the corporation tax and they would personally benefit with it being a fully electric car.

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Replying to Jo Wood:
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By Tax Dragon
13th Sep 2022 16:53

It's lucky they have you to advise them then.

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By Hugo Fair
12th Sep 2022 13:50

I'm confused ...

Title says "Can Ltd Co lease a car from a director?" ... but the ensuing post says "A director of one of my clients has bought an electric car on a PCP scheme. They are wanting their limited company to pay the monthly finance cost and for it to be treat as a company car."

So which is it?
Director retains 'ownership' but sub-leases to his company? OR
Lease company agrees to transfer 'ownership' (and as TD says 'liability') to company?

Doubt it'll make much of a difference to the outcome sought - just which hurdle is encountered.

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Replying to Hugo Fair:
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By Jo Wood
13th Sep 2022 16:39

Hi Hugo,

My client's company hasn't been trading long so they were reluctant to try and lease the car through the company which is why they've done it personally. They want it to be treat as a company car that they have use of and will take a reduced salary to go towards the payments and the balance they will put through on a P11(d). My question, which I obviously didn't explain correctly in my post, was, will they have to transfer the ownership of the car to the company or can they keep it under their own name? and from the information you've all given me it sounds as though it depends on if the finance company will allow it to be transferred or as my client really wants to it is as a sub-lease to the company.
Assuming they can do either of the options, would the salary sacrifice be straight forward? This is the first time I'm going to be dealing with this.

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Replying to Jo Wood:
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By Hugo Fair
13th Sep 2022 17:47

The problem commences where you say "They want it to be treat as ..."

That's not how Tax works ... you don't start with what you want and then re-arrange the historical facts to achieve that position.
There's nothing wrong with that approach when you are planning for the future, but historical facts are just that ... facts.

It is NOT a company car - and it is the individual who has contractual liability for making monthly payments.
So if, instead, the company starts paying those (or reimbursing the director) then all they are doing is increasing taxable/nicable earnings - and, no, Sal Sac is not available in that circumstance (of employee 'ownership').

Oh and if client actually manages to sub-lease the car to the company then, by definition, those payments are earnings subject to PAYE.

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