The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:
This guidance covers some ideas for tax planning for the provision of cars to owner-managers andtheir spouses / civil partners. Detailed rules regarding the taxation of company cars are covered in the Company cars guidance note in the Employment taxes module (subscription sensitive).
For guidance on the VAT implications of purchasing or leasing a car through the company, see the Buying andselling a car, Leasing a car andMotoring expenses guidance notes in the VAT module (all subscription sensitive).
HMRC provides a Company Car andCar Fuel Benefit Calculator .
If an owner-manager or director uses his own car for business purposes then he can be reimbursed by the company without incurring tax liabilities, provided payments are made within the limits prescribed by HMRC. Alternatively, if he uses a company car, he pays income tax on the benefit he receives based on the level of the car’s CO2 emissions andits list price. The employing company will also be liable to Class 1A NIC on the benefit.
The company will usually pay for ownership or lease of the car andmost of the ongoing associated costs. Provided that these costs are made wholly andexclusively for the purpose of paying the owner-manager, they will be allowable deductions for corporation tax purposes. The company receives corporation tax relief for depreciation of company cars in the form of capital allowances. There may also be an adjustment to the company’s profits for leased cars.
Therefore, when assisting a client in deciding the best option, comparative calculations will need to be prepared, taking into account the impact of the following:
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