Cars, BIK and whatnot

Jonny303

Hi,

Just looking for peoples opinion as to what they might do this situation regarding cars for myself and my wife. I am onto my accountant about it but just curious for other opinions.

1. I own a Ltd company that involves me travelling. VAT registered
2. I am also PAYE with another company, and could justify a car/van from this.
3. My wife and I have a partnership which is her full time employment. She owns a salon and can justify a car for travelling out to customers. VAT registered

A. We own between us a commercial van, OMV €20,000 and a car with a OMV of €35,000. (When I say own, we are waiting to transfer them into our names from another company when we decide whats the best way to do it)
B. Both vehicles are open to be "owned" by the PAYE company, my company or the sole trader.

I had my own thoughts on it until I came across something today stating that sole traders are not subject to BIK, is this correct? It sounded strange to me.

Just trying to work out what is the best way financially to go about it. The cash is there for either company, the partnership or privately to own each vehicle. Any advice?

Lockedout2

There is a lot going on here.

BIK is computed based on the business mileage. You have not indicated the level of business mileage.

A sole trader does not pay BIK but by the same token the amount of capital allowances is restricted to % of business use with a maximum allowance of €24,000 so for example a €30k car would qualify for €24,000 or &3,000 per year with a 50% claim or €1,500.

The BIK on a €30k car with low mileage is €9,000. What's your business mileage.

Jonny303

Business mileage through the salon would be minimal.
Business mileage through my own company, maybe 10k-15k a year.

EndaHonesty

My accountant's advice was to never have a company car when self employed.

Charge expenses to the company or claim mileage.

bmwguy

EndaHonesty wrote: »

My accountant's advice was to never have a company car when self employed.

Charge expenses to the company or claim mileage.

This is really great advice.

Gloomtastic!

So who owns the car then?

Jonny303

At the moment, both are owned by the PAYE job. Its a company I run but don't actually own. If I do leave it, ill be subcontracting back into it from my other company

Lockedout2

Let's look at the figures.

It's your company so in reality it's your money that's going to be spent.

Let's say the company buys the car new value 24,000. The company will get capital allowances of that amount so that's neutral. It costs the company to tax, insure, run and service the car say it's 4,000 per annum. You will pay BIK on 7,200 or 3,600. Let's say the car depreciates by 14,000 over 4 years, the annual cost is 4,000 + 3,600 + 3,500 = 11,100.

Alternatively you buy the car and charge mileage. You have to pay for the car and the running costs. You charge mileage which is paid tax free on 15,000 Kms is around 5,700.

So now you have to pay the running costs 4,000 you have to cover the depreciation 3,500, so you have to increase your salary to cover the shortfall of 1,800 so pay extra tax of 1,800 on that.

So it cost you 7,500 and the company 1,800 to have it yourself the is also a bit of extra CT but not much so overall your better having the car your self. Answer might be different if your mileage was higher. Answer would be the same if the value of the car is higher.

Jonny303

Thanks for that. I was thinking based on the above that the car being owned by the partnership might be the best option and for my company to take the van with 5% BIK

smash

EndaHonesty wrote: »

My accountant's advice was to never have a company car when self employed.

Charge expenses to the company or claim mileage.

Such as? As far as I'm aware you can't charge servicing, tax or insurance as an expense and the max you can claim tax free on mileage is around 59c per KM, and that's capped after a certain amount of kilometres.