UK Ltd Company purchase best options

[koniesinvenice]

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.

Let's say I pay in cash £100k for the car but my company only has £80k profit in the tax year.

Can I carry over 20k to the next tax year?

Sponsored

 

[matchboy1976]

Let's say I pay in cash £100k for the car but my company only has £80k profit in the tax year.

Can I carry over 20k to the next tax year?

Yes, if the company buys the car and those are your figures then those corporation tax “losses” will be carried forward to the next year (and yes I am an accountant!)

 

[Ross]

Yes, if the company buys the car and those are your figures then those corporation tax “losses” will be carried forward to the next year (and yes I am an accountant!)
[/QUOTE

When I bought 2 electric cars in company tax year 2020 for the directors of my Ltd Co the cost was £144,000 so the tax benefit was £28,800.
I dont make enough money to generate that much tax and didnt have the cash to buy them.
The cars were bought with the bounce back loan as deposits and the rest financed.
My corporate tax bill October 1st 2021 was about £20k which was wiped out!
The other £8,800 was actually rebated from from the previous company tax year 2019.
So I paid no tax October 2021 and the revenue refunded me £8800.

 

[RGBArgee]

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?

I had this dilemma. My Accountant ( Mr Crook from Portishead) advised Purchase use the offset and depreciate then buy back at depreciated figure and take low BIK on the chin.

 

[Ross]

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?

No 3

 

[mcr21]

No 3

The IR payments is a deductible expense on corporation tax. Still, with the current financing rates it's probably a good idea to consider a cash purchase.

 

[Ross]

The IR payments is a deductible expense on corporation tax. Still, with the current financing rates it's probably a good idea to consider a cash purchase.

The GFV protects you from cataclysmic drop in value. I would minimise the high interest rate by maximising the deposit.
ie. Everything except GFV/balloon payment.
My first Taycan had a £35 k deposit and the monthly payment was just interest on the balloon, less than £300 at 5.9%.

 

[Finbo]

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

HTH!

Can’t claim VAT in UK on any car even if 100% business only

 

[Sonic]

Can’t claim VAT in UK on any car even if 100% business only

Yes, you can.

https://www.gov.uk/charge-reclaim-r...ehicles,specified in your employee's contract.

 

[Finbo]

Yes, you can.

https://www.gov.uk/charge-reclaim-record-vat/reclaim-vat-business-expenses#:~:text=Vehicles,specified in your employee's contract.

Apologies. You are really pushing the boundaries, in theory it’s possible and if you’re going to use your Taycan as a taxi maybe. HMRC are challenging firms that claim vat on a T30 Kombi Transporter for their reps, good luck with a car

 

[Dabz]

The other challenge to that interpretation of the vat rule is finding an accountant who’s willing to push the boundaries too

 

[Ross]

The other challenge to that interpretation of the vat rule is finding an accountant who’s willing to push the boundaries too

Or a completely dishonest corrupt one?

 

[LotusPhil]

Instead of claiming the CT back in year one you can claim a smaller amount each year like Im doing with a second hand purchase. A friend who bought a new Tesla did it this way as the tax savings were greater over three years compared to all in year one.
Phil

 

[Bobzilla]

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.

That assumes that the current regime of 100% FYA carries on. If that goes it will likely be 18% of reducing balance basis for capital allowances.

 

[LotusPhil]

Yep.
My car was a bit dearer than that but yes that’s what Im doing. I PXd my personal car too which effectively gave my company a directors loan of the £30k deposit which I’m taking out of the company at £1k a month tax free for the next 30 months.
Phil

Sponsored