UK - Business Contract Purchase (BCP) or Contract Hire

[Fish Fingers]

I decided against putting mine through the business (2 and 1 above).
It seemed to get a bit messy with co-directors and dividends etc.

I also want to own it myself as I think residuals will be very good.

My M2 used to cost me £200 pm in Shell V Power. £91 pm extended warranty, about £30pm Road tax and £15pm Connected Services.
So c£335 pm - all now replaced with about £20pm additional home electricity.

But still claim 45ppm business use.

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[Rob********]

I have a business partner and with regards to the cost of the car and him not wanting to lose out, all we will do (approved by accountants) is add the net cost of the car (i.e. after tax reliefs) for any given tax year back into the net company profits once the year end is complete (this is an excel calc), and then split the profits as we would normally do. He then gets his proper share and I get mine, less the cost of the car. This is the same way we treat large pension contributions as we each want to contribute directors pension contributions are varying amounts each year.

 

[TaycanHero]

I have a business partner and with regards to the cost of the car and him not wanting to lose out, all we will do (approved by accountants) is add the net cost of the car (i.e. after tax reliefs) for any given tax year back into the net company profits once the year end is complete (this is an excel calc), and then split the profits as we would normally do. He then gets his proper share and I get mine, less the cost of the car. This is the same way we treat large pension contributions as we each want to contribute directors pension contributions are varying amounts each year.

Smart way of doing it.

I would love to withdraw my company cash as divis or salary, but the taxation is eye-watering. It does mean I have missed out on things like property purchase, but oh well.

That now means I live and work abroad in many wonderful places for half the year. Pros and cons to everything.

@Fish Fingers Fair enough and each of us has to make a decision based on our business and financial situation. I still wince at the income tax and NI you'd have paid, but alas there is little avoiding tax when you need to dispose an asset or pay yourself income.

 

[ufe96196]

I have a colleague and concerning the expense of the vehicle and him not having any desire to miss out, all we will do (endorsed by bookkeepers) is add the net expense of the vehicle (for example after charge reliefs) for some get help with programming assignment https://www.aussiessay.com/programming-assignment-help/ college year back into the net university benefits once the year end is finished (this is a succeed calc), and afterward split the benefits as we would regularly do. He then, at that point, gets his appropriate offer and I get mine, less the expense of the vehicle. This is the same way we treat enormous benefits commitments as we each need to contribute chiefs annuity commitments are shifting sums every year.

good solution to the problem!

 

[meeko]

Hi all,

Thought I'd resurrect this very interesting thread, since there are some very interesting opinions here...

I've ordered a MY23 4S ST which is fairly highly optioned (£113k) It's due any day and I intended to purchase outright via my LTD company (sole director, small salary, rest dividends) with retained profit, that as has been discussed, is eroding due to high inflation.

Having watched the Taycan market while waiting for delivery, I've been getting very nervous as it's clearly tanked and there are so many available used now. If it were a year old, I can imagine achieving £70k at best (one just sold on Collectingcars for that), a loss of nearly 40% - it could easily be achieve <£60k in two years.

Clearly there would be a CT saving on depreciation, but I'm wondering even with this, and the 2% BIK (increasing in 2025) it just doesn't make sense to purchase Taycans via LTD co (at least for relatively short term ownerships).

Just after everyone's thoughts before I part with my hard earned and regret throwing it away!

 

[Dabz]

Still far better to purchase through the company than losing money via tax by withdrawing and buying personally. It’ll depreciate both ways, might as well let the company claim corp tax back on the depreciation

 

[meeko]

Hi Dabz, thanks for your thoughts - and I agree, should I want to purchase a Taycan privately. But I probably wouldn't. Given the enormous depreciation, I calculated if I took that as dividends, I would have circa £1100/month personally and of course could finance /lease a lot of cool petrol cars for that!

 

[Wrep]

Ive got a Ltd company. Just tired to purchase on BCP. I got refused. They told me my retained profits/earning were less than the value of the vehicle. They said 100% value will be offset so I would end up publishing negative profit for the year. This doesn’t make sense to me. I thought you didn’t own the vehicle till you pay the balloon payment at the end of the term. Why would the value of the car go against my retained earnings. Have the dealer got this wrong?

 

[Dabz]

On a lease yes, but for contract purchase you're committing to purchase the vehicle so it goes down the same as an outright purchase (commitment to pay) - despite the fact you can cut and run instead of paying the final ballon payment.

A business lease would be treated differently

 

[Wrep]

Thanks!

 

[DavidG]

Ive got a Ltd company. Just tired to purchase on BCP. I got refused. They told me my retained profits/earning were less than the value of the vehicle. They said 100% value will be offset so I would end up publishing negative profit for the year. This doesn’t make sense to me. I thought you didn’t own the vehicle till you pay the balloon payment at the end of the term. Why would the value of the car go against my retained earnings. Have the dealer got this wrong?

Yes they are wrong, only the depreciation you will apply goes against profits in the P&L usually 20-25% per year, the 100% first year allowance just goes against profits for calculation of Corp tax and if that generates a loss you can carry that back to the previous year and get a refund.

 

[Andics]

On a lease yes, but for contract purchase you're committing to purchase the vehicle so it goes down the same as an outright purchase (commitment to pay) - despite the fact you can cut and run instead of paying the final ballon payment.

A business lease would be treated differently

Yes they are wrong, only the depreciation you will apply goes against profits in the P&L usually 20-25% per year, the 100% first year allowance just goes against profits for calculation of Corp tax and if that generates a loss you can carry that back to the previous year and get a refund.

My understanding is similar to Dabz. With Contract purchase you are actually buying the car (i.e. you can claim the 25% new car tax break in full for the year) AND you are commiting to a loan to the LTD for the terms agreed.

I do not know about the depreciation yearly offset but David point makes total sense..... in my case I had enough funds in the LTD and I decided to buy cash to avoid these headaches (with a 20% msrp discount on in-stock my24 taycan which hopefully will help with depreciation..)

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