An overview for owner managers of considerations for company vehicles.
You should be aware that should a company provide an employee with a company car, there will be tax implications for both the employee and the employer.
A common question from owner managers then arises: Should the company purchase the car or should the user of car purchase it personally and be compensated for the costs associated with owning and running that car?
All aspects of car ownership should be considered:
Cost of running the car itself
• Finance costs
• Tax & insurance
• Maintenance & repairs
• Fuel costs and consumption
Tax implications of business or personal ownership
• P11D value of vehicle
• Emissions used to calculate the benefit in kind
• Fuel benefit
• VAT reclaim on certain motor expenses
• Personal income tax and NIC
• Cash flow advantages from accelerated capital allowances on “green” vehicles.
The total cost of running the car and settling relevant tax liabilities can differ by several thousand pounds between personal and business ownership. This can swing either way depending on the specific car and the amount of personal and business mileage. Ideally you should take a case by case approach.
We have worked through numerous scenarios with our clients and have come up with a list of general rules which can steer you in the right direction:
• Go Green. Low emission cars have low taxable benefits (in some cases the annual benefit can be as low as 5%). With recent advances in technology these are no longer limited to small hatchbacks, most of the big manufacturers now produce saloons and estates that fall into the 10% per annum benefit bracket.
• In most cases high performance, high price and high emission vehicles should be owned personally as they can generate huge tax charges, with a benefit based on 35% per annum of their list price!
• Remove the provision for private fuel in company cars - the fuel benefit for relatively modest personal mileage can be very expensive.