Can anyone help me please? I am doing books for a lady who bought a car last year, but has just started her business and is using the car as a company car as she has to travel with her work.
What do i put as the figure for the car as an asset, do i put what she paid for it a year ago (although it obviously isnt worth that now) or do I work out the depreciation costs to date and use the NBV to start with.
I personally would be inclined to value it at it's worth when it was introduced to the business. Get the vehicle details (Make model year and mileage) and look in an assortment of car mags (Autotrader etc) and try and get an average value. Alternatively, get a local friendly garage to look in their Glasses Guide and give you the current retail valuation.
Unfortunately cars tend to devalue a lot in their first year (maybe as much as 60%), so using a standard depreciation to calculate it would not give it's real value, and would skew the balance sheet. If you think that a £10K new car depreciated at 20% would mean the business owes the owner £8K but if in reality the car is only worth £4K on the open market.
That's what I would do. Others may have a different method
Does she have any personal use of the car? Some clients assume that if they are using it for the company they can claim back all expenses pertaining to the vehicle and wouldn't think of telling you. If she does, you need to apportion off some of the expenses for reflect this.
Would agree with Bill, need a value when the business started.
NB if she's trading as a limited company (the term 'company car' suggests that), then there are also BIK issues, based on the list price rather than the value when she introduced it to the business. If her business is a sole trader/partnership, then no issue.
I agree with Bill, you could use ebay for free just to check what similar cars are going for. For example i recently bought a car that was 18600 from new, i gave 3000 for it at just 3 years old. Remember to check the mileage against any others that you are using for comparison because high mileage greatly devalues a vehicle.
Mushroom - yes her car is also used for personal use. I assume that we need to work out the % it is used for business and % it is used for personal and then just claim the business related % of fuel costs, repairs etc, but assume the car still goes down as an asset at what it is currently worth in the books?
Hi, I am writing this very quickly, I'm up to my eyes, just taking a quick break, so forgive me if this seems a bit garbled.
Is the company limited or sole trader? If limited, and the vehicle goes into the company's balance sheet, the company would own the vehicle, not your client, the company reclaims the costs of the car in full and as Nick pointed out, your client is subject to BIK issues on the personal usage, plus the company may be subject to Class 1A contributions as well. There are various BIK issues here which would mean a long winded reply which may not be necessary (plus pushed for time), but there are various calculators and guides on HMRC site to help you with this - 2 basic scenarios, your client could pay the company back for the private miles, the rates of which are available on HMRC's site (they are tiered to engine size, etc), which may be beneficial if the company is subject to class 1A's), and there is a calculator that will let you know how much your client will have to pay for the private use if she doesn't pay the company back, I think its called 'car fuel benefit calculator' or 'company car benefit calculator' or something like that. There is a change to these rules from April 2011, see http://www.hmrc.gov.uk/cars/rule-changes.htm You would need to inform HMRC with a P46 (car) notification as well. Your client may be better keeping the car out of the company, and claim mileage (45p for the first 10,000 miles, 25p thereafter), she could submit mileage logs for the records that detail business usage and this would save hassle with valuations, etc.
If sole trader, you apply a percentage as to what is used for business, and again claim that percentage of the capital allowance, fuel, repairs etc, otherwise again as Phil has said, mileage may be a better option. Generally speaking, clients with cheaper or older cars that are not high maintenance, or the ones with high mileage are better off with the mileage option but you will have to do some sums to work out what is the best for your client.
Sorry for the quick reply, but tax credit deadline looming and I am really up to my eyes!
I suspect that the client is a sole trader, and the phrase 'company car' was simply suggesting that the car was bought specifically for the company - but only Keri knows.
