Want to get company car through business in UK
Getting a company car through your business in the UK involves several steps. Verify whether you and your business are eligible to provide a company car. Typically, businesses can provide company cars to employees, directors, or partners.
Determine whether the company will own the car outright or lease it. Leasing is a common option and may offer flexibility, especially if you want to regularly update your fleet. The BiK is the value of the benefit an employee receives from their company car. It’s used to calculate the income tax owed by the employee. HMRC provides guidance on how to calculate BiK. Inform HM Revenue and Customs (HMRC) about the provision of a company car. This is usually done through the company’s annual tax return, and you must also report any changes throughout the tax year.
Exclusive Business Use or Some Personal Use Car?
The choice between providing a company car for exclusive business use or allowing some personal use depends on various factors, and businesses often make decisions based on their specific needs and policies. Here are considerations for both options:
Exclusive Business Use:
Tax Advantages: Providing a company car exclusively for business use may have tax advantages. The benefit in kind (BiK) is typically lower for cars used exclusively for business purposes, potentially reducing the tax liability for both the employer and the employee.
Simplified Administration: Exclusive business use can simplify administrative tasks. Tracking and reporting business-related expenses, such as fuel and maintenance, may be more straightforward.
Cost Control: Employers have more control over costs when a company car is used solely for business purposes. The associated expenses are easier to predict and manage.
Some Personal Use:
Employee Attraction and Retention: Allowing some personal use of the company car can be an attractive employment benefit. It may contribute to employee satisfaction and retention.
Flexible Work Arrangements: Providing personal use can support flexible work arrangements. Employees may appreciate the convenience of using the company car for both business and personal purposes.
Increased BiK, Higher Taxation: Allowing personal use usually increases the benefit in kind (BiK) value, resulting in higher tax liabilities for both the employer and the employee. It’s crucial to consider the financial implications.
Detailed Record-Keeping: When personal use is permitted, detailed record-keeping becomes essential to accurately report business and personal mileage, fuel consumption, and other expenses.
Balancing Both:
Clear Policy: Regardless of the chosen approach, having a clear company car policy is essential. Define the rules for personal use, including any financial contributions required from the employee.
Regular Reviews: Regularly review the company car policy to ensure it aligns with the business’s needs and remains fair and competitive. Adjustments may be necessary based on changing circumstances.
The decision depends on the goals and priorities of the business. Employers should communicate the company car policy transparently to employees, and, if necessary, seek legal and financial advice to ensure compliance with regulations and optimization of benefits.
How does my company claim for car cost?
Claiming car costs for your company involves ensuring proper documentation, adhering to tax regulations, and understanding the methods available for expense claims. Here are general steps to guide you:
Identify Allowable Expenses: Determine the types of car-related expenses that are allowable for claims. Allowable expenses may include fuel, maintenance, repairs, insurance, and other costs directly related to business use.
Record Business Mileage: Keep detailed records of business mileage. This is crucial for calculating the business portion of expenses. You can use mileage logs, apps, or other tools to track miles specifically driven for business purposes.
Separate Business and Personal Use: Clearly distinguish between business and personal use of the car. If the car is used for personal purposes, you need to calculate the percentage of business use to determine the allowable expense.
Choose a Claim Method: There are different methods for claiming car expenses, and you can choose the one that best suits your situation:
- Mileage Allowance: Claim a set amount per business mile driven. The approved mileage rates can be found on HMRC’s website.
- Actual Costs: Claim the actual costs incurred, including fuel, maintenance, insurance, and other relevant expenses. This requires detailed record-keeping.
Keep Detailed Records: Maintain accurate and detailed records of all car-related expenses. This includes receipts, invoices, and records of business mileage. Good record-keeping is crucial for compliance and to support your claims in case of an audit.
VAT Considerations: If your company is VAT registered, consider the VAT implications of car expenses. Some expenses may be subject to VAT, and you can potentially reclaim a portion of the VAT paid.
Consider Benefit in Kind (BiK): If the company car is used for personal purposes, employees may be liable for a Benefit in Kind (BiK) tax. Ensure that this is accounted for when calculating the overall cost to the company.
Submit Claims to HMRC: Include the allowable car expenses when submitting your company’s annual tax return to HM Revenue and Customs (HMRC). Provide accurate figures and supporting documentation.
Seek Professional Advice: Consider seeking advice from a tax professional or accountant to ensure compliance with current tax regulations. Tax rules may change, and a professional can provide guidance tailored to your specific situation.
Regular Review: Periodically review your company’s car expense policies to ensure they remain aligned with your business needs and comply with any changes in tax regulations.
Can my company pay for the fuel?
your company can pay for the fuel for a company car, and this expense is generally considered an allowable business expense. However, there are important considerations and tax implications to keep in mind:
Business Use Only: Fuel expenses paid by the company should be exclusively for business use. If the car is also used for personal purposes, it’s essential to calculate the business mileage percentage and only claim the corresponding portion of fuel costs.
Claiming Mileage Allowance: One common method is to claim a mileage allowance for business miles driven. HM Revenue and Customs (HMRC) provides approved mileage rates that represent the allowable amount per business mile. This can simplify the process of claiming fuel costs.
Actual Costs Method: Alternatively, you can choose to claim the actual costs of fuel. This involves keeping all fuel receipts and calculating the business portion based on the business mileage percentage.
VAT Considerations: If your company is VAT registered, you may be able to reclaim a portion of the VAT on fuel costs. However, the ability to reclaim VAT depends on the nature of the car use and the VAT status of the expenses.
Specific circumstances may vary, and it is crucial to stay informed about current tax rules and regulations. Seeking professional advice ensures that you make the most of available allowances while remaining compliant with tax laws.