December 14, 2019

Should I buy a Company Car ?

If you are a director of your own company, there is the opportunity for you to put the purchase, running costs and fuel for a car through the company. The down side is that HMRC will view this as a perk of the job and tax you on the benefit received, on their calculation. This calculation is linked to the full retail price of the car plus accessories (not the purchase price you paid) multiplied by a percentage based on the CO2 emissions. There is then another benefit of the fuel with the same percentage used on a prescribed figure for fuel for the year. If you then multiply this benefit by your highest rate of tax, you may appreciate that it will depend on the amount you use the car and the CO2 levels as to whether you wish to pay the extra tax.

 

Other considerations are that you cannot claim the VAT back on the purchase of the car unless you are a taxi or a driving school i.e. it is a tool of the trade. You may have to pay extra for insurance as if owned by the company, it must be insured in the company’s name. The company may not yet have any no claims discount. Insuring it through the company may also affect your no claims. If you have company insurance for a number of years, your personal no claims discount may expire. Depending on how you intend to finance the vehicle, leasing companies and finance houses may want to have a close look at the accounts for the last three years.

 

When I had a company car, my company took out a bank loan to fund it and my insurance company (NFU) looked at real life so there were no insurance implications. They did not just tick boxes on a form/computer screen. Any car used for business should have appropriate cover, particularly if you are using it to deliver goods to customers as the goods need to be insured ‘in transit’.

 

By all means get a company car, but calculate (or get someone else to) how much it will add to your tax bill up before you sign on the dotted line. Fuel can be treated separately so don’t assume if you have a company car, you have to get the company to pay for all your fuel. You can put in a claim per mile which is much less than 45p per mile as you use your personal car.

 

The alternative is that you own and fund the car yourself, making sure you include business within the insurance cover. You can then claim your 45p per mile and get the company to pay you at that rate.

 

The situation is different if you are a sole trader – but I will leave that for another day… If you are looking to make a decision and need assistance – contact me

What is your company doing for its employees this Christmas?

If you are taking them out for Christmas dinner, you can claim up to £150 including VAT without having to declare it as a benefit. However, if you wanted to give them cash, or something they could exchange for cash, you would need to put it through the payroll and pay tax and NI on the amount.

 

So, if it a Christmas bonus they get, I am sure they will appreciate it especially if you pay the tax and NI due. If you simply want to but them a small gift, that is fine – especially if it is a turkey. That is definitely tax allowable.

Can we help ?

If you send your employees and clients Christmas cards, this is another allowable expense – so is the work’s Christmas tree. If you find some of the shopping is combined with personal shopping, this is not a problem. Ask the shop to prepare a receipt for your business. If this is too much hassle and you have a till receipt for combined personal and business items, just circle and claim for the business costs and keep the receipt. The business then owes you the money by way of an expense claim or payment out of the business funds. This type of split shopping trip is not just true at Christmas. If you buy you office milk and paper from Tescos with the week’s shopping, keep the receipt and mark what is business and make sure you claim.

 

If you are a very small limited company, i.e. just you with help from the family, don’t forget you are an employee and entitled to your Christmas lunch. Have a good one.

Do you enjoy working online ?

The government is trying to encourage greater use of computers. This may be a move to efficiency, but is it what you like to do?

This might sound a bit rich, as you are reading this on line, but do you do it by choice? What happened to the old days of piles of papers?

As an accountant, I still deal with piles of paper. Most departments at HM Revenue and Customs cannot communicate by e-mail. They are improving, but having tried to deal with things over the telephone, including call backs to then be told to write in can be a little frustrating. What compounded the issue for me was the first chap I spoke with didn’t know the answer so I suggested writing in. I was told not to do that, as it would not be looked at for at least three weeks. This is much better than some departments a couple of years ago, where they had a three month backlog of post. So things are improving.
Can we help ?
If you have an outstanding issue, by all means ask your accountant to chase it, but the more information you can give them, the more they can give HMRC, the more likely you are to get an answer. If you have an outstanding tax return for 2011/12, get it moving now so you know how much tax you will have to pay by 31st January 2013. If you are due a refund, there is still a chance you could get it by Christmas – if you act now and let them simply put the money in your account. If only one could just get all customers and client to ‘simply put the money in your account’, life would be wonderful!

How much do you put away for tax?

They say the two certainties in life are death and taxes. The big difference is that you know when taxes are due, the same thing can’t usually be said about death.

I have today been to a client who has, for as long as I have known her, religiously put money away each month so that when her VAT bill or tax bill arrives, the money is always there to pay it. When she changed her trading status from sole trader to limited company we sat down and did the figures to make sure she knew approximately how much she would need to have saved and by when. What she now does is put a larger amount aside every month and then pays a dividend to cover her holidays and Christmas. She also pays a monthly salary and has this, and its PAYE, set up on standing order.

work out your tax and put it awayAlthough she would rather not pay tax, she knows the more she pays, the better she is doing. By reviewing her transfers to the company’s second account regularly, she just sighs with a smile when I tell her how much VAT to pay or what her corporation tax bill is. This is different from the reaction of some of my other clients who know when the tax is due, but always think it will be nil. At least that is one excuse as to why they haven’t put money aside.

If you are not sure how much to put aside, speak to your accountant and they should be able to help. Remember it is always better to put too much away and have a nice surprise rather than a nasty shock.

Could your business benefit from this proactive planning ? Contact me and I will be happy to help.