I have been advised that the time is probably right now to move my little business from a Sole Trader to a Ltd comp.
At the moment I have my own car, for which I log the business miles at 45p per mile.
I am considering changing the car soon and have I think two options :-
1) I buy a second hand one in my own name and continue to charge business miles to the new Ltd Comp.
2) I've always liked the idea of lease hire, and with the business going ok, thought perhaps now may be the time consider it. Business leasing seems cheaper than Personal, so could I get a lease agreement on the Ltd company thats just been started? (I obviously have no offical accounts yet for that, but could provide the Self Assess figures for trading in previous years.) Would it be tax efficant to do that? (The cars I'm looking at fall into the above 160g CO2 threshold, at around £300 per month to lease.) Seen as my business mileage percentage is only about 30% of total miles travelled, would that cause a problem, (is it better to have a higher business miles ratio?) Also, if the car were leased through the company, how do you record mileage, vehicle servicing etc?
I'd love to be driving around in a spanking new car, but am trying to get my head around what implications that would have on the Ltd Comp, and my own taxes.
Unless the car has low emissions, it's usually more tax efficient to hold it personally although you'll need to crunch the numbers to see which is the better option for your particular circumstances.
Some of the implications of a company lease would be:
- If the lease hire is an operating lease, the company will get corporation tax relief on the monthly lease payment, although 15% of the cost will be disallowed as the CO2 emissions will exceed 160g/km.
- There will be a car benefit in kind, based on a percentage of the list price of the vehicle. The company will pay Class 1a NI on this whilst the benefit will count towards your taxable employment income.
- Running costs of the car can go through the company and attract corporation tax relief. You could get the company to pay for the fuel as well but this would lead to a fuel benefit in kind. This is usually only worthwhile if there is a lot of private mileage - again, you'd need to compare the cost of paying for fuel privately and putting it through the company.
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
Hello, there is no simple answer to your question.
If you lease the car, then a claim could be made for all the running costs of the car (i.e. petrol, tax, insurance and repairs). Does not matter if your made private journeys or not.
However, you could be subject to scale charges for the company providing you with the car and fuel for private journeys upon which you would pay income tax (and the company Class 1A National Insurance).
There are ways of alleviating these possible liabilities!
Truemanbrown is right and I agree with him. On the other hand, most people purchase an automobile instead of leasing it, which in many cases make sense, but not always. However, if one wished to get a Scion iQ lease or a lease on a number of other models, they will probably be able to do it for dirt affordable thanks to car manufacturers not charging much. You can check out this article here for more info: Car dealers, purchase here, pay here.
-- Edited by keisha008 on Saturday 20th of October 2012 11:33:00 AM
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"Not everything that can be counted counts, and not everything that counts can be counted." - Albert Einstein
It might be worth approaching the car sales people about whether they would grant a lease to a brand new company first. It's often a struggle to get HP for a new company, I don't know about a lease but I think that may also be difficult I'm afraid, so maybe it would be worth finding out if it's a realistic possibility first of all?
On the other hand, most people purchase an automobile instead of leasing it, which in many cases make sense, but not always. However, if one wished to get a Scion iQ lease or a lease on a number of other models, they will probably be able to do it for dirt affordable thanks to car manufacturers not charging much. You can check out this article here for more info: 
