UK Ltd Company purchase best options

[DavidUK]

The idea of a Taycan dream is getting closer. I know this isn't stricly Taycan but I have a feeling many have done similar for private use through their Ltd company. I realise I need to ask our accountant this, but I won't get a reply this weekend! I need to optimise the way I get it and was after advice.

Note: Assumption our corp tax rate is 20%
1. Outright purchase. The accountant is less keen a the suggestion of us drawing this much out anyway.
Avoids interest, but places all residual etc onto us.
The sums feel easy on this. Eg car £100k, £20k available to offset corp tax with.
When we sell it after a few years, we'd probably need to repay some of that as it's come back into the business. Eg sell for £60k = ~12k back on corp tax.

2. PCP Low Deposit £5k deposit, PCP over 3 years.
Is this essentially the same as purchase? We can offset upto 100% corp tax of £20k still?

3. PCP High Deposit.
Still getting to go the PCP Route, but minimising the interest, since we don't need to pay unnecessary interest.

I don't know if I'm stating the obvious here, but doing it via PCP and taking on interest (especially at the current 10.9%!) seems overall far more expensive.
I gather the interest is treated nicely. Is it just the same 20% that can be used offsetting the corp tax?

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[Rob********]

Im going HP with balloon on mine. Full CT relief first year. When sell, pay CT on sale price. Hopefully some equity back in the cash pot. CT relief on finance costs each year.

 

[Sonic]

If you want to use for personal use, legitimately, without concern then you can't reclaim any of the VAT on a purchase.

Note: Assumption our corp tax rate is 20%
1. Outright purchase. The accountant is less keen a the suggestion of us drawing this much out anyway.
Avoids interest, but places all residual etc onto us.
The sums feel easy on this. Eg car £100k, £20k available to offset corp tax with.
When we sell it after a few years, we'd probably need to repay some of that as it's come back into the business. Eg sell for £60k = ~12k back on corp tax.

Don't assume - we already know, and it makes a massive difference.

E.g. i bought outright £155k @ 19% = £29.45k CT reduction. If i sell after April for £120k @ 26.5% then i owe £31.8k in CT - even though the car has depreciated £35k.

Post April <£50k profit is 19%, £50-250k is 26.5%, £250k+ is 25%. This makes a massive difference.

2. PCP Low Deposit £5k deposit, PCP over 3 years.
Is this essentially the same as purchase? We can offset upto 100% corp tax of £20k still?

Yes PCP is a purchase so still qualifies for 100% First Year Allowance relief on CT.

3. PCP High Deposit.
Still getting to go the PCP Route, but minimising the interest, since we don't need to pay unnecessary interest.

I don't know if I'm stating the obvious here, but doing it via PCP and taking on interest (especially at the current 10.9%!) seems overall far more expensive.
I gather the interest is treated nicely. Is it just the same 20% that can be used offsetting the corp tax?

Interest rates are high and likely going higher, so an important thing to consider for any interest bearing debt if you already have the funds in the company and you don't have anything better to do with them.

You will be making significant personal savings by shifting vehicle expenditure from your net income to the business - the vehicle purchase, running costs, insurance, tyes, maintenance, etc.

Interest is offset against profit, so you don't pay tax on it.

Another option to consider is Hire Purchase, as PCP has a balloon payment at the end which is interest-bearing i.e. you carry the debt for the entire period of the lease, and pay interesting on it, and then decide what to do with it at the end of the lease. If you have funds sat in the company it makes no sense to do this.

HP, by contrast, means you'll pay the entire balance across the loan period, and own the vehicle outright at the end without any balloon payment.

HTH!

 

[Dabz]

Can’t comment too much on the other options but we’ll be paying 25% CT after April so I’m buying outright, saving the 25k from tax bill, and will deal with the tax on a sale later down the line. Also means the company pays for my home EV charger install, insurance, etc and BiK is low. Means I can swap an Audi A5 for a Taycan which wouldn’t make sense if doing personally

 

[Midlifecrisis]

Had missed the hike in CT for the 50-250k profits. So when I sell the car, there will effectively be no saving in CT due to depreciation because the rate changes. I wonder if I could set up a second Ltd company to trade so that the only income when I sell the car is the car itself. As long as it depreciates to <50k then the lower rate will apply. Need to talk to accountant by the look of it

 

[Dabz]

the second Ltd would need to be entirely separate, otherwise the CT rate applied to associated group companies

the other answer is to keep the car until it depreciates enormously, but with electric tech moving on so fast that might not be palatable. I’m hoping to keep mine as long as I can until I get bored, but the longest I’ve ever had a car is 5 years before getting itchy feet

 

[Sarah's dog chariot]

Hey. I have a limited company and an accountant who Ive had god knows how many chats about this with.

I had the same initial thoughts as you but I chose to buy outright due to the below.

Financing a Porsche with current high interest rates made no sense to me. Not IF you have the cash. It is a very expensive time to finance a depreciating asset-but that's just my lame opinion. Peronsally, I thought if I could not avoid the interest, Id have to on principal alone not do it. Even at a low estimate PCP, HP all came in north of 15K in interest alone. I utterly get why people do if it they have to, or need cash flow,or feel the numbers work for them better investing etc etc ... but for myself and possibly a lot of ltd company owners, if the cash is there at least the interest saving assists in buffering in some depreciation etc. Plus as others say it comes off the corp tax bill which goes up come April anyway.

Another thing to check as I do not claim to be 100% on this... my accountant seems to think HMRC view PCP and HP as essentially lease type agreements .... because have have no purchased the asset until the balloon is paid. So given that, you get relief on the payments interest and deposits as you pay them, but not the 100% asset relief from the outset. As always, accountants seem to vary in what they say here (bloody worrying but true) but mine seemed very certain re this point. No saying I am, but he was !

I hope this helps my friend., Not often that I get to chime in with something useful so flexing some pseudo-knowledge

Edit- attempted to clean up all the horrendous typos !

 

[TaycanHero]

Had missed the hike in CT for the 50-250k profits. So when I sell the car, there will effectively be no saving in CT due to depreciation because the rate changes. I wonder if I could set up a second Ltd company to trade so that the only income when I sell the car is the car itself. As long as it depreciates to <50k then the lower rate will apply. Need to talk to accountant by the look of it

Yes, really! Absolutely ridiculous that "the little guy", which is most UK businesses, pay higher CT than a mega corp at an effective 26.5% up to £250k!

What you are describing is not possible. You would be the owner of both entities, to transfer ownership of the car, otherwise Company B would have to purchase the car from Company A. There is still a CT obligation.

The UK makes it very difficult to get away from paying taxes, be it personal or business.

All you could do is defer CT by simply buying a new company car of the same (or more) value than the one you are offloading. That way you can account for a net £0 gain or a loss. Eventually you will have to pay the CT, but you could rinse n repeat the above until the reprobates in parliament bring corp tax lower (2028?).

Otherwise any profit and you pay CT.

If you have purchased through the company Q1 23, that I would say is unwise where you could have deferred and paid April 7 then defer 25% / 25% or a future lower corp tax vs 19% / 25% or a future lower corp tax (if it ever happens).

Financing right now is silly. Even through a business, I just wouldn't bother for something that after the deposit is still 70-90k. That's £14-19k in interest over two years, but most financing terms are 36 months...

Buy a Puegot e208. My current ride via ONTO. It's incredible and something my PEC day instructor drove as his daily. Good enough for him.

 

[Dabz]

As TaycanHero says above - if you'r elikely to buy another new car when the Taycan is being sold, you probably won't have a CT liability (presuming the new car is more than the Taycan's residual value). It means getting in a never ending loop of upgrading, but then that's what most people do with cars.

As an example, my Taycan will be bought outright through the Ltd Co in May (or June...or whenever it actually arrives). 25% CT deduction. Then in 3, 4, 5 years - depending on what is released next - I'll buy another and chop the original car in, so save CT on the balancing payment.

This assumes your Ltd Co continues to trade and make profit, rather than the original car purchase being a one-off way of using up cash in the business.

 

[Midlifecrisis]

Was planning to sell it to myself at some point. Will have to wait for it to depreciate a lot. If I set up a new company I would leave the car in the old one and just start trading in the new one. A bit of a hassle but certainly possible to do.

 

[Jaydub]

If you have purchased through the company Q1 23, that I would say is unwise where you could have deferred and paid April 7 then defer 25% / 25% or a future lower corp tax vs 19% / 25% or a future lower corp tax (if it ever happens).

Only if your company year end is 31st March

 

[Ross]

Yes, really! Absolutely ridiculous that "the little guy", which is most UK businesses, pay higher CT than a mega corp at an effective 26.5% up to £250k!

What you are describing is not possible. You would be the owner of both entities, to transfer ownership of the car, otherwise Company B would have to purchase the car from Company A. There is still a CT obligation.

The UK makes it very difficult to get away from paying taxes, be it personal or business.

All you could do is defer CT by simply buying a new company car of the same (or more) value than the one you are offloading. That way you can account for a net £0 gain or a loss. Eventually you will have to pay the CT, but you could rinse n repeat the above until the reprobates in parliament bring corp tax lower (2028?).

Otherwise any profit and you pay CT.

If you have purchased through the company Q1 23, that I would say is unwise where you could have deferred and paid April 7 then defer 25% / 25% or a future lower corp tax vs 19% / 25% or a future lower corp tax (if it ever happens).

Financing right now is silly. Even through a business, I just wouldn't bother for something that after the deposit is still 70-90k. That's £14-19k in interest over two years, but most financing terms are 36 months...

Buy a Puegot e208. My current ride via ONTO. It's incredible and something my PEC day instructor drove as his daily. Good enough for him.

That’s Keith at PEC isn’t it?
With the e208.
Top bloke, ex police instructor. Does the demo laps at the F1 Grand Prix. Awesome driver. I asked him to do a couple of demo laps. Blown away.
Reminded me what a shit driver I am. Not that I needed reminding.

Don’t forget the first £50k profit from April is still taxed at only 19%.
Of course selling a 1 yr old GTS will put any Co into the 25% bracket.

Now is just not the right time to sell.
Any Taycan will be worth a bit more or at least the same in Autumn or even next spring especially if Pootin has an ‘accident’ and the war stops.
We should all be hanging on at the moment, Ltd Co or not, hard as it is to resist trading in for the shiny new one you have been waiting months for.
Even at 10.9% APR.

If you have to sell from a Ltd Co do it before end of March.

I also want to sell to myself at retirement in next 2-3 yrs. I will hang on for now.
I will drag out the Ltd Co until the car has depreciated good and proper.
Plan to sell the business but keep the Ltd Co. Pay off the finance (7.9%) and work as Locum to feed the Co keeping cars in the Co.

 

[TaycanHero]

That’s Keith at PEC isn’t it?
With the e208.
Top bloke, ex police instructor. Does the demo laps at the F1 Grand Prix. Awesome driver. I asked him to do a couple of demo laps. Blown away.
Reminded me what a shit driver I am. Not that I needed reminding.

Don’t forget the first £50k profit from April is still taxed at only 19%.
Of course selling a 1 yr old GTS will put any Co into the 25% bracket.

Now is just not the right time to sell.
Any Taycan will be worth a bit more or at least the same in Autumn or even next spring especially if Pootin has an ‘accident’ and the war stops.
We should all be hanging on at the moment, Ltd Co or not, hard as it is to resist trading in for the shiny new one you have been waiting months for.
Even at 10.9% APR.

If you have to sell from a Ltd Co do it before end of March.

I also want to sell to myself at retirement in next 2-3 yrs. I will hang on for now.
I will drag out the Ltd Co until the car has depreciated good and proper.
Plan to sell the business but keep the Ltd Co. Pay off the finance (7.9%) and work as Locum to feed the Co keeping cars in the Co.

It was indeed Keith! Great guy. He did a lap in the Taycan and I too realised just how atrocious I am at driving. I was positively pedestrian around the track compared to him, to the point of it being embarrassing. But then I don't pretend I'm any good

I've made the decision to leave the UK taking my business with me. A lot has been happening since getting back to the UK in December. I was planning on working abroad again but instead put a lot of effort into working out where to best domicile everything. Has been stressful, time consuming, but hugely educational.

Today I finally got confirmation that my (foreign) business bank account is now open for my new business abroad. I leave the UK permanently middle of next month, just have to now sort out the UK Ltd MVL.

I'll be transferring the Taycan deposit to my personal name, though not sure if I will go ahead now. As a business expense it made financial sense. Now I have that same £125k as personal money less a 10% CGT payment (and significantly lower corp tax and income tax), it makes no sense over an investment instead.

I might skip it altogether and put a deposit down for a Cayman EV.

By then I might be back in the UK... if they make corp tax and personal tax more attractive. But then I don't see that happening by any significant sum until the end of this decade.

Perhaps the Porsche I eventually end up buying will be LHD instead

You plan sounds sensible and I hope it all works out for you!

 

[Murph7355]

....
Today I finally got confirmation that my (foreign) business bank account is now open for my new business abroad. I leave the UK permanently middle of next month, just have to now sort out the UK Ltd MVL.
...

Congrats TH.

MVL's can take a while here at the moment...there's a govt backlog that means the final papers and returns etc can take a fair while (6-9mths I believe).

I wish the govt would wake up on this sort of shit. But sadly I see no end to it - on the contrary, it will get worse and worse. "End of the decade"? No chance.

For some of the other guys asking questions above....if you're twisting and turning to make things work through the company, HMRC will have thought of it years ago. And remember, they fight dirty

 

[DynamoCappo]

As TaycanHero says above - if you'r elikely to buy another new car when the Taycan is being sold, you probably won't have a CT liability (presuming the new car is more than the Taycan's residual value). It means getting in a never ending loop of upgrading, but then that's what most people do with cars.

As an example, my Taycan will be bought outright through the Ltd Co in May (or June...or whenever it actually arrives). 25% CT deduction. Then in 3, 4, 5 years - depending on what is released next - I'll buy another and chop the original car in, so save CT on the balancing payment.

This assumes your Ltd Co continues to trade and make profit, rather than the original car purchase being a one-off way of using up cash in the business.

Yeah, that's my understanding too (I think)

As long as we're buying a new car at a greater value than the balloon payment / value of the trade in at the time, there's no CT liability.

Happy with that as I means I can always convince the missus we need a top level new car as it's saving money!

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