The following Owner-Managed Businesses guidance note Produced 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 and their spouses / civil partners. Detailed rules regarding the taxation of company cars are covered in the Company cars guidance note in the Employment taxes module.
For guidance on the VAT implications of purchasing or leasing a car through the company, see the Buying and selling a car, Leasing a car and Motoring expenses guidance notes in the VAT module.
HMRC provides a company car and car fuel benefit calculator.
If an owner-manager or director uses their own car for business purposes, then they can be reimbursed by the company without incurring tax liabilities, provided, payments are made within the limits prescribed by HMRC. Alternatively, if they use a company car, they would pay income tax on the benefit received based on the level of the car’s CO2 emissions and its 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 and most of the ongoing associated costs. Provided that these costs are made wholly and exclusively 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:
the car’s CO2 emissions ― car benefit charges are based on CO2 emissions. Also, where there is flexibility over the choice of vehicle, the possibility of generous reliefs for low and zero-emission cars cannot be ignored
the car’s list price ― this is distinct from the actual cost of the vehicle. It relates to the cost of the car, including VAT, and including delivery charges. It doesn’t
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
The basic rule is that all benefits provided to an employee by reason of their employment are taxable unless there is a specific exemption or other rule that means they are not chargeable to tax.ExemptionsThe main exemptions for employee benefits are in ITEPA 2003, ss 227–326B (Pt 4).Below is an
Time for paymentTwo statutory rules apply on death:•tax is ‘due’ six months after the end of the month of death and carries interest from the ‘due’ date until paidThere is a possibility of payment by instalments, but this applies to certain types of property only ― see the ‘Availability of
What is structures and buildings allowance (SBA)?From 29 October 2018, expenditure on constructing a non-residential building or structure, or in certain cases, expenditure on acquiring such a building or structure, qualifies for an SBA. The following note has been updated for the changes announced
This guidance note provides an overview of what conditions need to be met before a business is entitled to treat VAT incurred as input tax. This note should be read in conjunction with the other notes in the ‘Claiming input tax’ subtopic. For a flowchart outlining the procedure for claiming input
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.