Day: April 14, 2012

Tax Advantages of a Classic Car

A classic car is one where:

  • the age of the car at the end of the year of assessment is 15 years or more and
  • the market value of the car for the year is £15,000

I found a 1968 Jaguar MkII for sale for £15,000 on

http://www.classiccarsforsale.co.uk/classic-car-page/165880/1968-jaguar-mkii/

The Mark 2 gained a reputation as a capable car among criminals and law enforcement alike; the 3.8 Litre model being particularly fast with its 220 bhp (164 kW) engine driving the car from 0-60 mph (97 km/h) in 8.5 seconds and to a top speed of 125 mph (201 km/h) with enough room for five adults. Popular as getaway cars, they were also employed by the Police to patrol British motorways.

The Mark 2 is also well known as the car driven by fictional TV detective Inspector Morse played by John Thaw

http://en.wikipedia.org/wiki/Jaguar_Mark_2

Assuming the list price was £2,000 (I can’t find the actual list price), the taxable benefit in kind would be £2,000 x 35% (maximum)x 40% (higher rate tax) = £280

As long as the Market Value is below £15,000 these rules apply above £15,000 the market value is used for the calculation, you can pay for your private fuel to avoid the tax on that.

steve@bicknells.net

Directors Loan v’s Private Use of Company Assets

Many Directors borrow money from their Limited Company, but there are 2 key costs:

If, your company, purchased assets and you used those assets privately, the treatment is much more favourable:

  • The cost of the asset is allowed against Corporation Tax and you can claim Capital Allowances and the Annual Investment Allowance

From April 2012 the rates of capital allowances have been reduced from (a) 20% to 18% and from on the Main Rate Pool (b) 10% to 8% for  ‘special rate’ expenditure respectively. At the same time the maximum amount of the Annual Investment Allowances (AIA) will be reduced to £25,000 a year (currently £100,000).

  • The Benefit In Kind is generally 20% of the market value http://www.hmrc.gov.uk/paye/exb/a-z/a/assets-available.htm#2
  • So, based on buying an asset for £10,000 – there will be saving in Corporation Tax of £2,000 and the Benefit In Kind Tax of £1,076, thats a net saving in year 1 of £924 compared to a cost in year 1 of £2715.20 on a loan (total difference £3,639.20), although the benefit in kind will be £860.80 more expensive in future years.

The Assets could be purchased from the Director but they must be transfered at Market Value.

According to Indicator ‘Tax Breaks for Directors’ assets owned by companies include antiques, paintings, furniture, business suits (but not vehicles) and the 20% benefit in kind amounts can be deducted from the value of the asset should it subsequently sold to an employee or director.

Generally you can only reclaim VAT on the purchase of Assets for Business Use http://www.hmrc.gov.uk/vat/managing/reclaiming/private-use.htm

steve@bicknells.net