Optimise Accountants -

Company cars and tax reliefs

March 16, 2017

advice on company cars and tax relief from Optimise Accountants

Have you heard about putting your cars into a Limited Liability Partnership (LLP)?

Do you wish to know the safest way to pay for your car through your business?

In our experience as tax specialists, we’ve found that it is better to charge 45p per mile for the first 10,000 miles and 25p per mile thereafter. You will need to keep a log of all journeys made a) from b) to c) reason d) miles done e) rate f) charge to your activity.

We also calculated and reviewed the ownership principle of cars.

In our opinion cars de-value the moment that you take it off the forecourt. You wouldn’t place money into a decreasing-valued investment, so why do it for cars?

Louise and Simon, the Directors of Optimise Accountant, both lease cars that are brand new, as they want certainty that the car is going to work and that no capital is tied into a depreciating asset.

The cost of a lease (rental) albeit is giving money to the lease company is far better from a value for money perspective that owning a car, selling it, and then finally replacing it with another car.

Cars in a limited company

It has been suggested that the company pays for the vehicle. The issue with this approach is that there is an instant benefit in kind (BIK). Using our spreadsheet calculator, you can see your personal tax liability would be if the company owned the car. Click Here to download the calculator

 

A BIK would need to be reported on a P11D form if the BIK was received by a Director or an employee earning (wages plus BIK) more than £8,500. The P11D form must be sent to HMRC by 6th July.

This will show how much tax and national insurance will be paid by you and the company.

Cars and Limited Liability Partnerships (LLPs)

We have seen a growing trend of property educators talk about LLPs and how you can expense the entire cost of the car.

The reality is that in 2014, HMRC had a crackdown on tax avoidance schemes of using LLPs to expense cars. As can be seen in the Fleet News Article where they show a court case where HMRC were successful in charging the individuals as though they had received a benefit in kind.

The car was fully charged against the income of the business. The HMRC decision was upheld by the upper tribunal, and the case can be found Here. This was also reported in the Taxation Article.

We do not feel that using LLPs is a good idea for expensing motor vehicles.

If HMRC were to find anyone using this scheme they have made it clear that all charges and penalties would be levied going back six tax years.

How to engage with us

If you want to understand how to implement this strategy or to discuss other finance/tax questions then please book some time with us using the below calendar.

Please use the redeem code “Article 33” to get 33% off your next consultation call.

If you are looking for a new accountant, then please book some time with us using the below calendar.

Please note that this booking is to describe our services and will not be used to discuss your personal tax affairs.



Get your FREE ebook "Property Investors Guide"
Enter your information to recieve the eBook

First Name:*
Last Name:*
Lead Source:*
Email:*
Phone:*

Telephone: 0115 939 4606
Email: simon@optimiseaccountants.co.uk