Is your business revving up to pay high vehicle costs? With the ever increasing cost of motoring and a more punitive tax regime, it’s worth revisiting the comparative cost of private mileage and company vehicles. Here we look at a few examples of business owners’ vehicles to show the true comparative costs (Based on AA running cost data):
As a private vehicle: A 2006 diesel hatchback used for 10k business miles and 5k personal miles would cost the owner about £3.3k run as a private vehicle with business mileage attracting corporation tax and vat relief.
As a company car: The same car owned as a company car and provided with all fuel paid would cost the business owner £4.7k as a 20% tax payer or a colossal £5.7k as a higher rate tax payer. As a company car with business mileage only paid, it will cost around £3.8k.
But what happens with a more expensive car?
As a private vehicle: A 2008 Audi TT with the same annual mileage will cost the business owner an estimated £9k per year.
As a company car: As a fully expensed company car this increase to £9.5k or £11.2k for higher rate tax payer. When this car is run as a company car with business mileage only paid, the net cost to the business owner is about £8.5k or £9.4k for a higher rate tax payer.
How to cut your vehicle costs
We recommend against the business paying for fuel for the car and instead recommend that you make a claim for business mileage only at the HMRC approved rates. For private fuel payments to be tax effective you would need to be spending in excess of £126 a week on fuel for private motoring in a more expensive car.
So why do business owners still run fully expensed cars through the business? In our experience this is because busy people don’t want the added burden of recording mileage. However this can often be done by admin support staff from electronic diaries – and may save you several thousand pounds!
You should also consider if it still makes sense to continue with the car as a company vehicle. This is especially the case as a car ages because the taxable benefit is based on the list price of the car and not the market value. As the car ages it may make sense to buy the car from the business and claim 45p a mile for business use.
However, every situation is unique and there’s no substitute for doing the sums on each vehicle. If you would like us to conduct a review of your business travel arrangements, please contact us on 0115 871 5842 or by email at: email@example.com