Closing down Ltd Co. - Pick-up leased through Ltd Co.

[Gaza]

After 6 years of contracting I've accepted a perm role. While I've enjoyed contracting the stress of long distance commuting and being away from home, combined with too many gaps between roles, convinced me (or more accurately, my wife convinced me) to go back to perm. On issue I will need to resolve is how to handle the lease on a pick-up that is leased by my Ltd Co. It was a 3 year lease that has roughly 18 months left to run. As far as I can tell I have 3 options:-

1. Novate the contract across to me turning it from a business lease to a personal lease.
2. Terminate the lease early by paying 50% of the remaining net payments - c.£3,200.
3. Pay all the remaining lease payments upfront.

I know 1 & 2 are viable options but each has a drawback. The pick-up was leased on the basis of 36k miles over 3 years but has already done 22k so I'm facing hefty excess mileage payments at the end of the lease if the current rate continues. I'd not want to incur these cost personally but not sure how I could manage these through to Ltd Co. before the lease is novated. With (2), it would hurt to hand over £3,200 and return the vehicle. Finally, in (3) I have no idea whether that is even a viable option and if it was, how HMRC would view it.

Thoughts?

[Maslins]

If you're thinking with (3) you could make all the payments from the company, claim tax relief, then use the car personally for the remainder of it, I can't see how you could justify that.

(2) you probably could justify as a business expense, but like you say means the car going back. If you want to keep the car, I think (1) is your only viable option.

Possible 4th option, don't close the company now, but keep it ticking over in the background. Hence keep car as a company lease for the remaining 18 months?

Unhelpful comment now I appreciate...but situations like this are another reason why we tend to recommend against company cars, leased or otherwise.

[northernladuk]

Why don't you speak to the lease company first?

I'm not sure 1 and 3 are even possible.

Will the company change the lease to a personal one? It's a pain in the ass to do it for a phone let alone a vehicle.

Any paying all the lease up front? The company won't exist anymore if you shut it down so would have thought that would be an issue to the leasing company. Who do they come after for extra money or if they thing get's written off etc.

I'd speak to them first to see what your options are before spending too much time picking one that just isn't possible.

[Lance]

option 2 - when you terminate early it's not 50% of the remaining payments. It's 50% of the total payments... I;ve done it once with the wife's car.

How does voluntary termination work?
To qualify for voluntary termination, you need to pay 50% of the total amount payable including interest and fees. Then you can hand back the car with no further charges. The only exception is if the vehicle has not been properly maintained. Or if it has incurred damage above reasonable wear and tear. Finally, you may also be charged if you exceed your mileage allowance. PCP agreements mean that customers have the right to exit their agreement after half the total amount payable has been paid.

Also.... that is a consumer protection thing so I'm not sure if that applies to a business vehicle.


If you can return it early the mileage shouldn't matter as you've not had it to term. Again though.... I've done this with the wife's car (she was over the 3 year mileage at 18 months), but that was a personal lease.


not sure if that helps....

[northernladuk]

not sure if that helps....

Do you want me to answer that?

[Lance]

Do you want me to answer that?

is this a rhetorical question?

[WTFH]

After 6 years of contracting I've accepted a perm role. While I've enjoyed contracting the stress of long distance commuting and being away from home, combined with too many gaps between roles, convinced me (or more accurately, my wife convinced me) to go back to perm. On issue I will need to resolve is how to handle the lease on a pick-up that is leased by my Ltd Co. It was a 3 year lease that has roughly 18 months left to run. As far as I can tell I have 3 options:-

1. Novate the contract across to me turning it from a business lease to a personal lease.
2. Terminate the lease early by paying 50% of the remaining net payments - c.£3,200.
3. Pay all the remaining lease payments upfront.

I know 1 & 2 are viable options but each has a drawback. The pick-up was leased on the basis of 36k miles over 3 years but has already done 22k so I'm facing hefty excess mileage payments at the end of the lease if the current rate continues. I'd not want to incur these cost personally but not sure how I could manage these through to Ltd Co. before the lease is novated. With (2), it would hurt to hand over £3,200 and return the vehicle. Finally, in (3) I have no idea whether that is even a viable option and if it was, how HMRC would view it.

Thoughts?

Without seeing your contract...
How much is the excess mileage charge? If it's 10p, then the "hefty" excess you refer to is £400 at the minute. Since you say one of the reasons for going perm is to get rid of the long commute, then the mileage you will be doing going forward should be a lot less
Did you lease it as a commercial vehicle (rather than a car)? If so, there may be VAT implications (50% VAT back for cars, 100% for vans)

You probably need to read the lease agreement. Then maybe contact the leasing company to see what they are prepared to offer you, which I don't believe will be options 1, 2, or 3.

[Gaza]

Thanks all

I have already spoken to the Lease Co but also wanted to get a view from the forum members. I have been told that 1 and 2 are possible. They will come back to me in a few days with more information.

@Lance - As it is a business lease (commercial vehicle) the lease company have confirmed that I would have to pay 50% of the remaining payments, net of VAT. What you seem to be referring to is the right to terminate a PCP after 50% of payments have been made.

@49WTFH - As it is capable of carrying 1 tonne it is classed as a commercial vehicle and therefore I only pay BIK as though it is a van. There shouldn't be any VAT implications as the VAT is only reclaimed (50% of it as I have personal use) each month/quarter.

Realistically, I think (1) is the only viable option. Although there is the 'nuclear' option; shutting down the business, paying HMRC all they are due, withdrawing all the cash from the bank and then telling the lease co the company has been dissolved and the vehicle is available for collection. The lease didn't require a personal guarantee so there wouldn't be an impact on me personally.

[WordIsBond]

Perhaps, if #1 is an option and that's what you chose, you could prorate the mileage allowance, take the current difference between that and the mileage so far, and YourCo could pay you the excess mileage rate for those miles. You'd say it is compensation for taking on a lease with a diminished mileage allowance.

Or, you can just do as suggested above and keep your company open.

[WordIsBond]

Realistically, I think (1) is the only viable option. Although there is the 'nuclear' option; shutting down the business, paying HMRC all they are due, withdrawing all the cash from the bank and then telling the lease co the company has been dissolved and the vehicle is available for collection. The lease didn't require a personal guarantee so there wouldn't be an impact on me personally.

That could get ugly. You would be personally enriching yourself at the expense of the company and its creditors. Directors have a duty of care. It may be the nuclear option but you might end up in an unpleasant legal battle, be banned from being a director, have your name in the news, end up losing your new permie job over the negative publicity, and who knows what else. But they probably wouldn't take your firstborn away from you, if it's the first time.

Seriously, don't even think about that.