Car and medical insurance

**ratewhore** · 27 November 2008, 16:48

1) I did. There wasn't a lot in it when it was all added up because i would have had to increase my dividend to afford it. And, of course, I didn't want to own a depreciating asset. My accountant told me that, if it's your company, there's not a lot of difference financially and that it was only disadvantageous if you're an employee.

Also, some people say low mileage - through the business, high mileage, go personal and claim the mileage.

2) I believe the insurance payments fir you can go through the business but, if there are claims, the amount of the claim is a BIK. Wife and child I can't see as anything other than a BIK.

But then, IANAA, so if you haven't got one get one, and ask them...

**Lewis** · 27 November 2008, 17:31

Originally posted by Arjay View Post

Hi

I've only recently started contracting through my limited company and need advice on expenses...

1) I'm thinking of buying a new car, but is it best to buy it through company of private and charge back. If it matters, the car will probably be 2 litre plus engine and I'll only be using it for commuting which isn't many miles
I've heard going through company isn't efficient seeing tax is based on CO2 emissions. If so why do so many car manufacturers still offer lots of deals "for business users"? Are they selling a different concept?

2) Same with medical insurance. I need to buy and cover my wife and child, so do I buy through company or buy privately? If private, can i claim anything back through company?

Thanks
Arjay

I recently asked my accountant about (1) and it was much better to buy personally. Relatively high CO2 emmissions meant that I would pay 30% of the purchase cost as a benfit in kind every year and I was told you can't reclaim VAT on the purchase either. I always thought it was only worth it if you have a very low emmissions car.

**ratewhore** · 27 November 2008, 22:07

Originally posted by Lewis View Post

I recently asked my accountant about (1) and it was much better to buy personally. Relatively high CO2 emmissions meant that I would pay 30% of the purchase cost as a benfit in kind every year and I was told you can't reclaim VAT on the purchase either. I always thought it was only worth it if you have a very low emmissions car.

Pick a car you like and ask your accountant to work it out for you in total. I had a dual fuel car so my tax was about 7% of the car value. Again, as I would have had to increase my dividend to afford the car personally, there was very little in it when it came down to the figures.

That also didn't take into account all the running costs you put through the books with a Co car. So it may have been financially better for me than I thought...

**BolshieBastard** · 27 November 2008, 23:28

Never, ever buy a company car. Its better to lease it.

**THEPUMA** · 28 November 2008, 09:19

What you might want to do if buying a new car is the old buy it through the company then three months down the line sell it to yourself at market value shimmy. That way the company gets corporation tax relief on the depreciation when you drive it off the forecourt and you only pay the depreciated value out of taxed income.

**Lewis** · 28 November 2008, 09:43

Originally posted by THEPUMA View Post

What you might want to do if buying a new car is the old buy it through the company then three months down the line sell it to yourself at market value shimmy. That way the company gets corporation tax relief on the depreciation when you drive it off the forecourt and you only pay the depreciated value out of taxed income.

Hmmm, well I have yet to pay for my new car so this might be of interest, the car has 219 g/Km Co2. I have checked already and the BIK is a fraction under 30% (29% percent I think it was). Car costs £34K.

So if company buys car and I take your 3 month example, I could sell to myself for say £30K but would still have to pay approx £2500 BIK in that period. Company saves corp tax on depreciation, which is what 21% of £4K = approx £800. I am worse off.

Unless I am missing something the car would have to be sold at a heavy discount (i.e. below market value) which makes it a bit of a scam that surely HMRC would see right through...

**THEPUMA** · 28 November 2008, 09:49

Originally posted by Lewis View Post

Hmmm, well I have yet to pay for my new car so this might be of interest, the car has 219 g/Km Co2. I have checked already and the BIK is a fraction under 30% (29% percent I think it was). Car costs £34K.

So if company buys car and I take your 3 month example, I could sell to myself for say £30K but would still have to pay approx £2500 BIK in that period. Company saves corp tax on depreciation, which is what 21% of £4K = approx £800. I am worse off.

Unless I am missing something the car would have to be sold at a heavy discount (i.e. below market value) which makes it a bit of a scam that surely HMRC would see right through...

Your tax calculation is wrong. You've either not restricted it to 3 months or not taken the tax on the BIK. It should go something like this:-

£34K x 29% x 3/12 x 20% (or 40%) = £493 or £986
Employer's NI = £315

The calculation is much more complicated than that if you are going to do it properly. In particular you need to take account of the (non-fuel) running costs of the car which the company will be able to pay in the 3 months. On the other hand, you also need to account for the mileage that could have been paid to you tax-free if the car were owned personally.

I suspect you might get away with being a little more aggressive on the depreciation too. Have a look on Autotrader at how much a 3 month old second hand model is selling for.

**Lewis** · 28 November 2008, 10:13

Originally posted by THEPUMA View Post

Your tax calculation is wrong. You've either not restricted it to 3 months or not taken the tax on the BIK. It should go something like this:-

£34K x 29% x 3/12 x 20% (or 40%) = £493 or £986
Employer's NI = £315

The calculation is much more complicated than that if you are going to do it properly. In particular you need to take account of the (non-fuel) running costs of the car which the company will be able to pay in the 3 months. On the other hand, you also need to account for the mileage that could have been paid to you tax-free if the car were owned personally.

I suspect you might get away with being a little more aggressive on the depreciation too. Have a look on Autotrader at how much a 3 month old second hand model is selling for.

Ah right ok I see. I forgot to multiply by 20% or add NI!

So as I've already maxed my divis this year that means tax and NI would be about £1300. Going to be zero running costs in first 3 months (unless insurance is one) and zero business miles (I take the train). So company would have to save about £1300 to break even (ignoring any taxes getting money out of company). Which means loss to company must be about £6k (i.e sell car for £28K).

With all the extra paperwork and potential for hassle with HMRC later (plus that I was told company insurance is more expensive than personal car insurance). I'd need to sell the car for much less that £28K to make it worth while, say about £22K. I couldn't honestly justify a 35% depreciation in car value after 3 months.

But I always enjoy finding out how these things work

**ratewhore** · 28 November 2008, 10:15

Originally posted by BolshieBastard View Post

Never, ever buy a company car. Its better to lease it.

Absolutely, that's what I did.

To the OP, choose another car...

Car and medical insurance