Times are changing and one of the decisions often asked by clients of their Accountant is “Should I buy this car through the company or personally?” A few years ago the answer inevitably for most business owners (not employees) was personally, especially when looking at the likes of the supercar and other gas gusslers that seem to appeal to most. The emission levels of these cars were such that maximum percentages were applied to both the fuel and car benefit which was based on the list price. This made having a company car very very expensive compared to the alternative method of increasing income to compensate for the car. However, most business owners weren’t put off purchasing these vehicles, it just meant it was done personally and not through the business.

Now the answer I find myself saying to most clients is “it depends” there is no clear cut response and each car needs to be looked at for its merits as the rates for super low emission cars make this decision one that needs investigation before being dismissed. Not only does the benefit in kind need assessing for the individual, but Capital Allowances which may be very favourable for the business have to be considered. It is very important when providing details of the car that you want that the specific model is provided, two different models of the Vauxhall Insignia can come up with very different answers as it is very much driven by the emission levels of the vehicle.

Recently I was asked about a particular brand of supercar and thought “oh no not again another car another disappointed client” but was gobsmacked by the answer I found myself looking at, so much so I had to look at the calculation 10 times before I convinced myself I was right.

So let’s compare two cars (other makes and models are available).

1. Porsche Carrera GTS (List Price £91,098) (CO2 Emission Level 223g/km)

porsche carrera redThe car and fuel benefit for the Porsche Carrera is £41,883 per annum, for a higher rate tax payer this will cost them personally £18,847 per annum in tax.

Capital allowances would amount to £7,288 per annum which equates to corporation tax relief of £1,458. At the current rate of capital allowances it would take 10 years for the company to recover half the value of the vehicle and over 70 years for the full value. (based on 2015/16 allowances)

2. BMW i8 (List Price £104,590) (CO2 Emission Levels 49g/km)

BMW i8 BlueThe car and fuel benefit for the BMW i8 is £6,335 per annum, for a higher rate tax payer this will cost them personally £2,850 per annum in tax.

Capital allowances would be £104,590 (assuming the car is brand new) which equates to corporation tax relief of £20,918. (based on 2015/16 allowances)

It’s staggering and an engineering achievement that these types of cars are now more energy efficient than some of the standard cars that business owners are driving. Sadly, many business owners are not likely to be able to afford one of these supercars but it should make you think next time you are considering changing your company vehicle.

Before you buy your next vehicle please remember to pick up the phone and ask your accountant “should I own it in or out of the company” 

Posted by  Lisa Greenwood

The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

Lambert Chapman Chartered Accountants

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