Any Accountants On The Board?

[CraigA_UK]

Hi all,

Lexus Reading have given me 3 quotes - 2 year CH, 3 year CH and 3 year PCP

I specifically don't want to own the car, as I'm sure there will be some interesting developments over the next 3 years so would like to keep my options open.

I'm a company director of my own business, which is in profit.

I have the option of either taking a higher dividend and doing personal PCP, or bringing the car into the biz and paying the BIK to run it as a company car.

The CH deal is between £40 - £50 per month cheaper, with a lower deposit (around £2k less)

I'll have a chat with my own accountant next week, but wondered if anyone would like to look at the quotes and help me with the pros/cons?

I'll not post the full financials up here as it may be against forum etiquette (unless told otherwise), so could anyone who would like to advise PM me?

Thanks!

Craig

[ColinBarber]

No problem with posting your figures here. It is more a question of whether you personally want to publicly share them, but I'm sure they would be of interest to other members in a similar position.

[CraigA_UK]

OK - F-sport w/premium nav, leather, AVS and ML stereo.

15k miles p/a.

2 Year CH (no maintenance):

Deposit £2,348.36 exc. VAT

23 monthlies of £391.39 exc. VAT

3 Year CH (no maintenance):
Deposit: £2,393.98 exc. VAT

35 monthlies of £399 exc. VAT

3 Year PCP:

Deposit: £6,500

Dealer contribution: £2,500

My contribution: £4,000

35 monthlies of: £519.08 (inc. VAT I assume)

Final repayment/guaranteed value: £14,085

According to the rep:

BUSINESS CONTRACT HIRE:

I’ve quoted for both 2 & 3 years as our 2 year rentals are

slightly lower.

List price:

£38850.00

Co2:

107g/km

Tax Band: 16%

If you pay tax at 20% you will pay £103.60 per month in company

car tax and at 40% tax it will cost £207.20 per month.

As a company the monthly rentals are allowable in full against

profits before you pay corporation tax so your savings will be:

2 year agreement:

Year one:

£1330.73

Year two:
£ 939.34

3 year agreement:

Year one:

£1356.60

Year two:
£ 957.60

Year three:
£ 957.60

My Situation:

My company is VAT registered and FY ending March 15 finished with around £40k profit.

I'm currently a 20% tax payer, on the cusp - so extracting extra money for PCP may push me to 40% - it would be a close call, but my gut feeling is it would. I need to double check.

I run approx 15k miles per annum, with around 65% being business mileage.

Thoughts please? :-)

[rayaans]

Im not too knowledgeable on this as I have an accountant myself but if you are a company director doesnt that mean that you are self employed? I have a company too and Im listed as self employed.

In which case, your company, depending on how many directors there are will be paying for the car which means you'll be paying from your pocket + the BIK if you go down the company car route? Wouldn't that work out alot more expensive?

2 year CH is going to cost you £11,349.64 + 50% VAT (£1134.96) as you use the car privately too (to and from work etc) Yearly cost = £6242.46

3 year CH will cost £16358.98 + 50% VAT (£1635.9). Total = £17994.88 - YEARLY COST £5998

PCP will cost you £19951.02 after reclaiming 50% VAT. Yearly cost £6650.34

Thats before any other advantages. Hopefully, someone with more knowledge can chime in

[DJP]

I'm not an accountant but:

If you buy personally via the PCP don't forget you can charge the company .45p a mile for business mileage (up to 10k then .25p).On 9750 miles (15k x 65%) thats £4387 PA tax free to you, AND tax deductible to the company so a big win there. The dividend is tax efficient for you, but Corporation Tax still payable on the profit.

Also don't forget if you increase salary you'll have employers NI as well as yours to factor in.

The contract hire route does mean you get the VAT back which you wouldn't via PCP, but there are rules about VAT apportionment as well so your Accountant will clarify that.

Rayaans, a company director is generally a Schedule E , i.e. PAYE position as far as HMRC is concerned. Income either salary/bonus and/or dividend. If it's your own company where you hold 20% or more of the shares mortgage providers and other lenders assess you as self employed for lending purposes, but from a tax position you'd be an employee. There are a few professions that are treated differently but in the main the above holds true.

It's an interesting scenario and I'll be interested to see how you take it forward. My company is VAT exempt so the contract hire has never been sensible, so I PCP and claim the 45p a mile.

Good luck!

[Steve44]

Not an accountant, but do run the Lexus as a company car, where my employer pays the full cost of the car, including maintenance, insurance and business fuel.

I do about 25k business and about 5k personal miles a year and claim back the business mileage at the current hmrc rate for company vehicles with engine >2000cc, currently 20ppm.

I also make a personal contribution monthly to the cost of the car. This affects my personal tax position on the car, 40% payer.

Overall, the car is costing me approx £130 a month once I factor in the profit I make on business fuel (costs me about 10-12ppm to run) plus private fuel. It's costing my employer much more. It's on a nominal 4yr/100k lease but I fully expect it to go back sooner to protect the residuals.

Surely your mileage is very relevant as this will effect the overall cost as Lexus service intervals are 12k and expensive. On the up side, the Bridgestone tyres are like rocks and crap, 20k miles and barely run in, lol!

[rayaans]

I'm not an accountant but:

If you buy personally via the PCP don't forget you can charge the company .45p a mile for business mileage (up to 10k then .25p).On 9750 miles (15k x 65%) thats £4387 PA tax free to you, AND tax deductible to the company so a big win there. The dividend is tax efficient for you, but Corporation Tax still payable on the profit.

Also don't forget if you increase salary you'll have employers NI as well as yours to factor in.

The contract hire route does mean you get the VAT back which you wouldn't via PCP, but there are rules about VAT apportionment as well so your Accountant will clarify that.

Rayaans, a company director is generally a Schedule E , i.e. PAYE position as far as HMRC is concerned. Income either salary/bonus and/or dividend. If it's your own company where you hold 20% or more of the shares mortgage providers and other lenders assess you as self employed for lending purposes, but from a tax position you'd be an employee. There are a few professions that are treated differently but in the main the above holds true.

It's an interesting scenario and I'll be interested to see how you take it forward. My company is VAT exempt so the contract hire has never been sensible, so I PCP and claim the 45p a mile.

Good luck!

Thats interesting - Im a director and classed as self employed by mortgage providers and im not paid by PAYE either.

[DJP]

I'm not an accountant but:

If you buy personally via the PCP don't forget you can charge the company .45p a mile for business mileage (up to 10k then .25p).On 9750 miles (15k x 65%) thats £4387 PA tax free to you, AND tax deductible to the company so a big win there. The dividend is tax efficient for you, but Corporation Tax still payable on the profit.

Also don't forget if you increase salary you'll have employers NI as well as yours to factor in.

The contract hire route does mean you get the VAT back which you wouldn't via PCP, but there are rules about VAT apportionment as well so your Accountant will clarify that.

Rayaans, a company director is generally a Schedule E , i.e. PAYE position as far as HMRC is concerned. Income either salary/bonus and/or dividend. If it's your own company where you hold 20% or more of the shares mortgage providers and other lenders assess you as self employed for lending purposes, but from a tax position you'd be an employee. There are a few professions that are treated differently but in the main the above holds true.

It's an interesting scenario and I'll be interested to see how you take it forward. My company is VAT exempt so the contract hire has never been sensible, so I PCP and claim the 45p a mile.

Good luck!

Thats interesting - Im a director and classed as self employed by mortgage providers and im not paid by PAYE either.

Sometimes it's the accountant that sorts it all out. I would expect a Director to be taxed under Schedule E provisions, rather than on net profit or a share of partnership earnings. As I said above, there are a few exceptions. A tad off topic for the OP though.

Sent from my iPad using Lexus OC

[Macscrooge]

Craig

I'd rely on your accountant for this one, as he'll have access to other info about your company's financials which might influence the decision.

And as others have said, as a Director you are an employee of the company. Mortgage lenders may take a different view because what they are lookup in at is regularity and security of income.

[Exdee]

Accountant here.

If I was you I would take the company car route as you are not interested in keeping car for long:

- You can claim 50% VAT on all the CH invoices.

- You can also claim VAT on any service/repair costs.

- You can claim VAT on business mileage (fuel scale charges)

All above assuming you are not on the flat rate VAT scheme.

The rental for the car will reduce your profit, hence less CT to pay.

I think the BIK Value of the car should be around 5.5K. Ask your Accountant to make your salary nil if you are already on the payroll. Take dividends instead. In month 12 the accountant should give you the difference between your p11d BIK and your personal allowance (or upper NI threshold) as a salary. This will further reduce your CT liability as it will be a deduction for the company.

Happy days!