Selling car to company Vs Selling personally

Tax efficient to sell car privately Vs sell to company then sell through company?

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Really burning my head here....

I have a limited company already earning about £100k profit. I also have a car in personal name, that I need to sell. I was wondering about 2 options.

(1) Sell the car as usual, without involving Ltd company. Will sell for about £7500 (market value is £10k but will be a hassle to get this)

(2) Sell the car to own Ltd company for market value £10k. Give myself £10k from the company. Then company sells it at £7500 (loss). I then get this at the end of tax year through divident/income, when distrubiting the profit to perosnal account.

 

Which would be reasonable/tax efficient way of doing this? thanks

Replies (8)

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By paul.benny
05th May 2024 12:47

If you sell car to company, you will be liable for a benefit in kind for as long as company owns it. IIRC, the bik is based on the original cost of the car, not the purchase price.

Don't forget you will have to tax or SORN car after you sell to company. You will, of course have to inform the DVLA of the change of ownership. And the car will be difficult to resell until you have the updated V5.

And your personal insurance will not cover it as you are longer the owner.

As director you have a fiducary duty towards company, so buying any asset and then shortly afterwards reselling at a loss breaches that fiducary duty.

If it's difficult to sell car for £10,000, I'm sceptical as to whether that truly is the MV. And it's likely that HMRC will also be sceptical.

Thanks (3)
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By Leywood
05th May 2024 12:53

Where did you hear about this dumb idea?

The MDTP?

You and your company are not the same entity.

This isn’t a free tax helpline for DIYers.

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By Paul Crowley
05th May 2024 13:03

What do you think HMRC would consider this plan to be if they read these details?
And you will need to tell them because the capital allowance claim will show it plain as day.
So much more to this, but your accountant can explain the rest.

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DougScott
By Dougscott
05th May 2024 14:55

And what does our accountant say about this very silly idea?

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By FactChecker
05th May 2024 15:15

As you were prepared to drop £2.5k on sale of car just to avoid 'hassle' ... think how more hassle you could avoid (whilst also minimising 'burning my head') if you spent that on getting some proper professional advice.

Anyway, can't imagine why you've set your sights so low ... why not:
- borrow the £100k from the company
- use that to buy a decent car (personally)
- sell it to the company for £110k (as they obviously don't understand car prices) ...
and pay-off the loan whilst keeping the £10k excess for yourself
- borrow another £100k from the company
- use that to buy car from company for £90k (they really don't understand do they) ...
whilst keeping another £10k for yourself
- and so on ..

Once you've got the hang of this recycling lark, you may find you no longer need to trade in order to get paid.

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Replying to FactChecker:
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By Paul Crowley
05th May 2024 16:48

Wish I had thought of that.

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By Ruddles
05th May 2024 17:25

If your company is making a profit of £100k it can afford to pay for tax advice.

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By Tax Dragon
06th May 2024 06:39

.

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