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It didn't; it wrote it down over the usual period, so it was worth nothing in the books when I bought it.
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I'd follow RF's advice Morris and get some tax advice before you flog the Passat. They may decide to knock on your door rattling the collecting tin!
By the way, congratulations on your stonking bargain! I can't see the firm I work for ever being as generous!
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Sorry to labour the point, but just who was doing your ex-employer's accounts? Capital items like cars should be depreciated on a 25% 'reducing balance' basis each year, so at the end of 5 years the value would be 23.73% of new. On a £16,500 car, that would be about £3900. If you bought it for £500, then your taxable benefit is £3400.
In the real world, however, the chances of anything coming of it are pretty slim. If it worries you, then stick the 'unpaid' tax in a postal account and forget about it for a while. If the IR come knocking, then plead ignorance and retrieve the cash......
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Sorry to labour the point, but just who was doing your ex-employer's accounts? Capital items like cars should be depreciated on a 25% 'reducing balance' basis each year, so at the end of 5 years the value would be 23.73% of new. On a £16,500 car, that would be about £3900. If you bought it for £500, then your taxable benefit is £3400. In the real world, however, the chances of anything coming of it are pretty slim. If it worries you, then stick the 'unpaid' tax in a postal account and forget about it for a while. If the IR come knocking, then plead ignorance and retrieve the cash......
I'm no tax expert and I'm not sure I fully understand your explanation here (wouldn't a 25% reducing balance be over four years?). If it's a five year period (from date of purchase) that covers 1998-2002 inclusive. Either way, I was definitely told it had already been written down and had no outstanding finance. Valuing it at £3.9k would, arguably, be over-valuing it. Age/condition means it's probably worth £-3.5k.
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Morris,
'Reducing balance' means that at the end of year 1 it's worth 75% of new; at the end of year 2 it's worth 75% of 75%, or 56.25% of new; at the end of year 3 it's worth 75% of 56.25%, or 42.19% of new....and so on. In theory, the car's value never actually reduces to nothing.
The car's asset value may not necessarily reflect the market value.........
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Morris, 'Reducing balance' means that at the end of year 1 it's worth 75% of new; at the end of year 2 it's worth 75% of 75%, or 56.25% of new; at the end of year 3 it's worth 75% of 56.25%, or 42.19% of new....and so on. In theory, the car's value never actually reduces to nothing. The car's asset value may not necessarily reflect the market value.........
That's the accountancy, then. In business terms, their attitude used to be that once something fell to a negligible value and was no longer needed they should just get it off the books. That, I think, is what enabled this deal to happen. They didn't want it or the hassle of disposing of it.
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Sadly the tax charge arises on the transfer of an asset at an undervalue, so you might have a liability regardless of whether or not you sell it.
It's probably a good idea to get the company to confirm that no 'benefit'arises, or that, if it was a big favour, they will pay any tax bill ....
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Thanks for the tax advice, guys. Wonder why my company forgot to tell me that (answer: I've just left!). Looks like I'll be holding on to the Passat until it is worth £500...
So, go back to the original question and insert references instead to SWMBO's 98S Honda Civic 1.4SE 5dr with 36k on the clock. The same rules apply: a life of short journeys means poor consumption (32-35mpg) and, again, it's probably worth £3.5k and I won't want to spend a penny more on a replacement which will retunr better economy.
Alternatives, which logic suggests should be diesel, please...
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1998 Honda, 36k - so 7k a year. Approximate difference in fuel costs a year between 30mpg and 50mpg would be about £350. I\'ve never run a diesel, but believe the servicing and maintenance to cost a little more than petrol engines, let\'s say £50 a year more. Road tax is going to cost you another £55 a year more
www.dvla.gov.uk/vehicles/taxation.htm#Private
Given that you\'re not wanting to contribute anything to change the car, you\'re going to have to trade for something older and/or with much higher milage (especially as you\'re looking a diesels), which will probably cost more to maintain - let\'s put a couple of hundred pounds aside each year for increased garage bills. So we\'re looking at an approxiamte saving of £50 pounds a year.
Hmmm, can\'t say I\'d be tempted to trade a known car for an older higher milage car I don\'t know for a saving of £4 a month.
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Keep the Passat, you've got years and years of depreciation-free motoring there. No diesel on earth can compete with that deal on a cost basis! By all means if you want a diesel , get one but I don't think it makes any financial sense in your position. If you're worried about short trips etc, change the oil more often but I think you're over-worrying. As for the tax issue, life's too short to worry about that one before it has even happened!
Cheers
Baz
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I had a 1.8 20v passat, it did 170 000 whike i had it, now its mid 180's. Got 32 to the gallon driving carefully. If the one you got has a good gear box it will serve you well. When I bought my company car the tax office advised me to get three independant valuations and pay the middle value, or else they could come back on me for benifit in kind.
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For a second car for that money, especially if the taxman doesn't make you hang on to the Passat for any longer than you want to, I'd be looking at a 1995 or 96 BMW 525 TDS (not the TD, doesn't have enough power). The previous shape model is IMHO more attractive and stylish than the current shape. My TD averaged around 35-37 mpg, but I think I would have done better than that in a TDS because I probably wouldn't have had to floor it as long to get up to speed.
My 1996 TD was in good shape but had only a little more than standard kit. I sold it 3 weeks ago for £4100, but I bought it in November for £3900 - it should be possible to find a 1995 TDS or even TDS SE for around £4k.
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How on earth will the taxman find out if you don't tell him? And even if he does, you must only be liable for tax on some value around £2500, so either way it's a bargain.
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>How on earth will the taxman find out if you don't tell him
Now let me see, how many people in the uk have internet access?
is that 10 or 20 million you think?
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>>How on earth will the taxman find out if you don't >> tell him Now let me see, how many people in the uk have internet access? is that 10 or 20 million you think?
How many people called Morris Ox?
c
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We're wandering rather darkly off topic here. I thought this was the Back Room, not 1984 part II. Civil rights campaigners would have a field day if they thought the IR was hacking into websites or databases to find potential offenders.
Wouldn't have throught the revenue is likely to get too excited provided I keep the car until it's worth £500.
Now, to get back to the subject of alternatives to the Honda...
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To replace your Honda and not pay a penny more..... difficult one this. For a start you need to sell your car privately for say £3500. Then you really need either to buy privately or at auction. If you trade in or buy from a dealer to the samr value , you will lose out, as typically a dealer will pull up to £1000 profit out of you. And that buys a lot of petrol!
Are you sure you have to change at all?I'm not at all convinced of this strategy. You know your Honda, which typically is one of the best cars on the road and you're going to swap for an unknown diesel of the same value if poss, just to get a few more mpg. I would say don't bother, just live with it until you're ready to change, then look at your options again.
The other issue here is getting a replacement diesel that is going to be half as reliable as your Honda most probably will.
Hope this helps
Baz
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Ta Baz, and other contributors. It's sometimes difficult to sift the wheat from the chaff and saving pound notes long term via routes like depreciation and reliability is less obvious than what you shell out every now and then on juice (specially when you have a bee in your bonnet about UK fuel prices).
I've parked the Passat issue for the obvious tax reasons, and I also have to admit that I bought the Honda originally because it was well-built, well-specced and had a reputation for being a darn sight more reliable than the 1990 Fiesta which SWMBO had struggled with before. That was a 1.1 LX with XR2-style low profiles...and no power steering. The Civic has PAS, aircon, a CD player and mechanicals which are smoother and more trustworthy than any Ford lump I've had experience of. So may be the answer is staring me in the face.
Feels like I've gone in a bit of a circle, but the BR's all about sound advice, so thanks again for all yr contributions.
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>Civil rights campaigners would have a field day if they thought the IR was hacking into websites or databases to find potential offenders.
You are aware that every ISP in the UK has to maintain records of internet traffic for goverment inspection?
Anyway - thread looks dead now, I shall seeth with jealosy for no longer because my company wont flog me my mota for 500 quid...........;-)
Seriously its a result - enjoy.
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You are aware that every ISP in the UK has to maintain records of internet traffic for goverment inspection?
I am, but the nature of the records and the laws (UK and European) governing their use would require something quite daring for this to lead anywhere.
(The End, credits roll...)
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By the way, I forgot to mention that I paid some undertakers £3,000 to bury the Passat in my garden this evening...
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Careful. Have you complied with the environmental legislation? Heavy fines...
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"You are aware that every ISP in the UK has tomaintain records of internet traffic for goverment inspection?"
I'm not sure of the actual law, but I thought they did it voluntarily, and mostly for only 5 days, unless the authorities were taking particular interest in someone. Anyone know the real facts here?
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Just one more question on the tax aspect of this thread. When the company did the deal with me I was no longer an employee and was, in theory, unemployed at the time. Anyone know if that affects the 'unearned income' issue thrown up by m'learned Back Roomers?
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Basially if you'e walking down the street and some complete stranger hands you a wad of cash, then theoretically they should tax you on that, never mind from a previous employer.
Otherwise we'd all be taking contract severance a few months later.
However, neither would I get too worked up at the likelihood of it happening. If you are worried, check how your ex-company dealt with the disposal of the car. If they took a write-off, then an audit of that company might well throw up your name.
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THIS IS NOT LEGAL ADVICE!
Theoretically they should tax you on cash from a stranger, assuming it's not a gift or the stranger dies within seven years (inheritance tax). Genuine gifts are not taxable, but it's hard to imagine that a sale at an undervalue from a past employer would count as anything other than consideration for services rendered in the past.
As a director or a trustee, if the company is bought any time soon, you would be in an even more difficult position as your liability would not just be taxable but also to the company itself. Imminent insolvency for the company would make things bad for you as the beneficiary of a preference as well...
Even so, the likelihood of anything bad happening is small and, even if you do get hit with a tax bill on the £3k or so undervalue, you've still got yourself a half price Passat. They're almost not going to prosecute you, though you might be assessed for the amount outstanding.
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Firstly just to be totally pedantic as I had a pretty lousy day at the office gifts are not assessable in the UK.
Secondly as regards the car the possibilities are:
1. No one will ever do anything
2. The company will fill in a P11D and you will find yourself with a tax bill, and possibly interest and if they are really obnoxious a penalty. The amount assessable will the difference in teh open market value when acquired and teh price actually paid.
3. You can argue that the company gave you the car as part of the severence arrangements, and if this was as a result of them breaking your employment contract then you might be able to argue that it is exempt.
4. The IR will discover the error and get annoyed with everyone
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If you are worried, check how your ex-companydealt with the disposal of the car. If they took a write-off, then an audit of that company might well throw up your name.
Don't know whether this makes any difference, but the car was worth nothing in the books, It was fully depreciated and had no oustanding finance. But for my offer they would have sent it through the block.
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The problem is that an asset has been depreciated ( 5 years for a car is a short time but they can probably swing it ) but they now have a £500 quid sum to put back in the books against that asset. £500 quid is a small amount of money tho so it will probably get lost in the accountancy noise, or even put down as a disposal cost!
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