Contract hire, pcp, finance, which is best

[Mark Bolam]

I hear exactly what Ben is saying.

The problem is modern vehicles can very, very expensive very quickly when out of warranty.

My wife has a D4 on a straight 3- year hire, hand the keys back afterwards, no worries ever, if it breaks it's replaced.

Lovely car. Would I want to own it in 10 years? No.

I've got an 11 year old Transit and a 20 year old Fiesta (GTi).

Works for us.

Horses for courses.

 

 

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[Steve Bullman]

That's what my accountant told me to do after 5 years, when it's effectively worthless.

 

Then when it's your personal property and you can sell it and keep the money personally.

 

My truck is a year old. Story basically is that I went limited in April, and the truck is now a bit of a loose end that needs dealt with one way or another. Accountant says effectlvely handing it back to Nissan at an 'arms length' transaction would be the cleanest way do go about it. Can't get my head round it though at this point. Currently on a pcp. Contract hire payment would be an extra £100 a month to what im paying now, and I would have no asset to speak of as such.

[Mick Dempsey]

Can't help Steve, I don't understand this stuff really, just groping around in the dark.

 

If you trust your acc, follow his advice.

[benedmonds]

My truck is a year old. Story basically is that I went limited in April, and the truck is now a bit of a loose end that needs dealt with one way or another. Accountant says effectlvely handing it back to Nissan at an 'arms length' transaction would be the cleanest way do go about it. Can't get my head round it though at this point. Currently on a pcp. Contract hire payment would be an extra £100 a month to what im paying now, and I would have no asset to speak of as such.

 

Another option would be to keep the truck that you know the history of, have already lost 20% on.. and charge the ltd co 45p a mile, when you are using it for business. If your VAT registered the company can still claim the VAT from the fuel portion I believe..

 

It might not be the most tax efficient way forward.. I don't know how the different schemes work, but I am pretty sure the companies running them make money from someone..

Edited July 12, 2017 by benedmonds

[Steve Bullman]

i cant understand why selling it to myself isn't efficient, unless I totally misunderstand everything.

wrote off 100% of this truck in its first year basically. So if I buy this truck from myself for £18k i will have that tax liability on my old sole trader business....but I will then have 18k to write off on my ltd company, so surely these 2 transactions pretty much offset each other?

[Steve Bullman]

and yes, accountant mentioned the 45p per mile thing as an option. I'm then stuck paying £300 a month to the finance company though which I am going to have to take form my drawings. The whole point of going limited amongst other things was to minimise my drawings and subsequent tax liability...so I really want that £300 a month coming out of my business account, not drawings

[richy_B]

i cant understand why selling it to myself isn't efficient, unless I totally misunderstand everything.

wrote off 100% of this truck in its first year basically. So if I buy this truck from myself for £18k i will have that tax liability on my old sole trader business....but I will then have 18k to write off on my ltd company, so surely these 2 transactions pretty much offset each other?

I don't think this scenario would be tax efficient. It is more the case that the business buy the van new (say £30k for example) and runs it for 5 years. At 5 years you buy the vehicle from the business for £10k (or a justifiable price, ie a PX amount youve been offered). You then run the van personally and claim 45p a mile for business usage up to 10,000 mile PA.

[benedmonds]

and yes, accountant mentioned the 45p per mile thing as an option. I'm then stuck paying £300 a month to the finance company though which I am going to have to take form my drawings. The whole point of going limited amongst other things was to minimise my drawings and subsequent tax liability...so I really want that £300 a month coming out of my business account, not drawings

 

I am no accountant.... But as I see it... the 45p per mile is a business expense, so will lower the amount of corporation tax you pay and will therefore lower your overall tax liabilities.. You might find you go to a load of effort for a few quid a year...

 

Accountants make things way to complicated for me, I think they do it to justify their fees... Whenever I go to see mine I glaze over after about 3 mins looking at his spreadsheets. These don't even seem to correlate to the sales and expenses that we provide him...

[richy_B]

I am no accountant.... But as I see it... the 45p per mile is a business expense, so will lower the amount of corporation tax you pay and will therefore lower your overall tax liabilities.. You might find you go to a load of effort for a few quid a year...

 

Accountants make things way to complicated for me, I think they do it to justify their fees... Whenever I go to see mine I glaze over after about 3 mins looking at his spreadsheets. These don't even seem to correlate to the sales and expenses that we provide him...

The 45p is a business expense and 100% deductible. It is also tax free as an individual so regardless of your salary/dividends you can claim £4,500 PA (if you do the full 10,000 pa). So you reduce your business tax bill but pay no tax on it as income personally.

 

Maybe not worth if for 1000 miles but from 5000 miles onwards it is an efficient option. It will hinge on how much the vehicle actually costs to run.

[Steve Bullman]

I just don't understand the 45p a mile. That's including fuel I assume?

 

 

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