Buying a Car? Getting it wrong can be costly
Clients often ask us what is the best way to buy a vehicle? Should they own it personally? Should they buy it through the business? Should they lease it? The list of questions is endless and many of the answers will depend upon your particular situation and requirements but beware getting it wrong could prove costly in terms of time and money.
The type and terms of your finance will be dictated by your circumstances, if you require a mid range car for business use this often lends itself to Lease purchase or Hire purchase. An executive car which is mainly used for private use will often be better bought outside the business, so a personal contract purchase should be considered. If you simply need a reliable car for a short period leasing may be the answer, but talk to your accountant about each type they may have a better solution.
The tax position regarding the purchase of your vehicle can be quite complex. Firstly you will need to consider the VAT position. Generally you can not claim VAT on the purchase price but may be able to claim a proportion of the VAT on lease costs, this is providing it is a car you are purchasing. If the vehicle is a van different rules apply, and the debate as to what is a car and what is a van is a questioning it’s self!
You will also need to consider the costs that you can deduct in arriving at your taxable business profit. The rules on both Capital Allowances and Lease rental deductions have recently changed.
Finally don’t forget if a vehicle is provided as a company car both the employee and employer will be liable to tax and National Insurance on the benefit.
The important aspect is to seek advice when buying a vehicle don’t just be blinded by that shiny new car.
Biggleswade Chronicle - 21st August 2009