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Company cars - seems to be a new rule in HMRC 480 since 2013

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    Company cars - seems to be a new rule in HMRC 480 since 2013

    Yes I have searched and read the forums relating to company cars - yes I know the general rule is just don't do it - it is better to have a private car and charge the mileage (45p etc).

    Reading the 2013 edition of HMRC 480 guidance http://www.hmrc.gov.uk/guidance/480.pdf there is a new section in Chapter 12 relating to calculating the BIK, specifically relating to re-imbursing for private use.

    "Method of calculation
    12.2
    Car benefit is calculated in a series of numbered steps (more details start at
    the paragraphs given):
    1 Find the price of the car (paragraph 12.4)
    2 Add the price of any accessories which fall to be taken into account
    (paragraph 12.8)
    3 Make any required deductions for capital contributions by the employee
    (paragraph 12.16)
    4 Find the appropriate percentage for the car (paragraph 12.22)
    5 Multiply the figure at Step 3 by the appropriate percentage at Step 4
    (paragraph 12.32)
    6 Make any required deduction for periods when the car was unavailable
    (paragraph 12.35)
    7 Make any required adjustment where the car is shared (paragraph 12.37)
    8 Make any required deduction for payments by the employee for private use
    of the car (paragraph 12.38).
    This method of calculation is modified in the case of classic cars (those 15
    years of age or more; Steps 1 to 3, see paragraph 12.18).
    There are special rules for disabled drivers affecting Step 1 (paragraph 12.7),
    Step 2 (paragraph 12.15) and Step 4 (paragraph 12.31)."

    and

    "Step 8: Reductions for private use
    12.38
    Payments that an employee makes for the private use of the car are deducted
    from the figure carried forward from Step 7 and can reduce the benefit
    charge to nil.
    To qualify as a deduction:
    • there must be a requirement in the year to make payments as a condition of
    the car being available for private use, and
    • the payments must be specifically for that private use. Payments for
    supplies of services, such as petrol or insurance, do not count.
    Any payments which the employee makes specifically for the private use of
    a replacement car as described in paragraph 12.36 are allowed as though
    they were payments for the private use of the normal car in that period."

    It seems that this new rule is better than the "car is on the drive so must be available" rule.

    So my question is - has anyone taken a company car and started re-imbursing so as to reduce BIK to nil - this seems to work easily if you are attending a temporary place of work (as defined in 490.pdf)?

    If anyone is doing this what calculation is being used to work out how much to re-imburse the company - are you paying back at 45p per mile?

    TIA
    This default font is sooooooooooooo boring and so are short usernames

    #2
    I'm not sure what you'd hope to gain.

    You get a BIK of £2k so you pay £2k back to your company to cancel out the BIK charge?

    So you gain naff all except maybe a little on the NIC if you take the £2k you pay it back as via a Div.

    Comment


      #3
      Originally posted by Sockpuppet View Post
      I'm not sure what you'd hope to gain.

      You get a BIK of £2k so you pay £2k back to your company to cancel out the BIK charge?

      So you gain naff all except maybe a little on the NIC if you take the £2k you pay it back as via a Div.
      hmm yes the gain is minimal but better to put money back into Ltd co than pay HMRC?

      Actually I would be paying higher rate tax so any saving on BIK seems worthwhile and hopefully do not end up on a K tax code.
      This default font is sooooooooooooo boring and so are short usernames

      Comment


        #4
        Originally posted by MPwannadecentincome View Post
        hmm yes the gain is minimal but better to put money back into Ltd co than pay HMRC?

        Actually I would be paying higher rate tax so any saving on BIK seems worthwhile and hopefully do not end up on a K tax code.
        Don't forget taxes getting it back out of the company though...
        'CUK forum personality of 2011 - Winner - Yes really!!!!

        Comment


          #5
          Originally posted by northernladuk View Post
          Don't forget taxes getting it back out of the company though...
          but that would be lower with divis? on BIK isn't employers and employee NI payable as well as higher rate tax (as I would be)?
          This default font is sooooooooooooo boring and so are short usernames

          Comment


            #6
            Originally posted by MPwannadecentincome View Post
            but that would be lower with divis? on BIK isn't employers and employee NI payable as well as higher rate tax (as I would be)?
            Well if you already divi up to your max rate based on your daily rate then no. It goes in to the pot that has to be taken out at the end.
            'CUK forum personality of 2011 - Winner - Yes really!!!!

            Comment


              #7
              Originally posted by northernladuk View Post
              Well if you already divi up to your max rate based on your daily rate then no. It goes in to the pot that has to be taken out at the end.
              errr... wot?
              This default font is sooooooooooooo boring and so are short usernames

              Comment


                #8
                Originally posted by MPwannadecentincome View Post
                errr... wot?
                You need to get money out of the company in order to put it back in, so you're paying tax to withdraw the money once.

                The money is back in the company rather than with HMRC, but then you'll pay yet more tax if you want to take it back out for a second time.

                This is all fine if you're just paying out basic rate dividends to yourself, but you could end up with a high marginal tax rate on that money if not.

                You'd be better off buying a van surely?
                ContractorUK Best Forum Adviser 2013

                Comment


                  #9
                  Originally posted by Clare@InTouch View Post
                  You need to get money out of the company in order to put it back in, so you're paying tax to withdraw the money once.

                  The money is back in the company rather than with HMRC, but then you'll pay yet more tax if you want to take it back out for a second time.

                  This is all fine if you're just paying out basic rate dividends to yourself, but you could end up with a high marginal tax rate on that money if not.

                  You'd be better off buying a van surely?
                  OK so what you are saying is that the saving is too small for higher rate tax payers?

                  My calculation is as follows:

                  If I re-imburse the company for private use of the car of course I am using money that has been taxed but if I put £2000 back into the company on £2000 worth of BIK I am saving Employer's NI (£276) plus Employee's NI (£40) plus 40% tax (£800) which totals £1116. If I try to take this out of the company again as divis at higher rate I pay effectively £800 tax thus saving £316.

                  Is that correct?

                  But would I really be withdrawing the money the 2nd time? As it is a company car funds need to be there to pay for the servicing, insurance, MOT, road tax, tyres, exhaust etc and if I am on flat rate VAT I won't be able to claim VAT back on those items anyway - these are all items that will reduce profits so less divis and we all know how expensive repairs can be!

                  BTW - No I will not drive a van thank you!
                  This default font is sooooooooooooo boring and so are short usernames

                  Comment


                    #10
                    Originally posted by MPwannadecentincome View Post
                    OK so what you are saying is that the saving is too small for higher rate tax payers?

                    My calculation is as follows:

                    If I re-imburse the company for private use of the car of course I am using money that has been taxed but if I put £2000 back into the company on £2000 worth of BIK I am saving Employer's NI (£276) plus Employee's NI (£40) plus 40% tax (£800) which totals £1116. If I try to take this out of the company again as divis at higher rate I pay effectively £800 tax thus saving £316.

                    Is that correct?

                    But would I really be withdrawing the money the 2nd time? As it is a company car funds need to be there to pay for the servicing, insurance, MOT, road tax, tyres, exhaust etc and if I am on flat rate VAT I won't be able to claim VAT back on those items anyway - these are all items that will reduce profits so less divis and we all know how expensive repairs can be!

                    BTW - No I will not drive a van thank you!
                    So the company pays for maintenance? Is this correct?

                    Comment

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