Good Morning. Hoping for some advice for a situation I have never been in before.
Background: My self employed wife is looking to get a new or newish car to replace her current car.
We had a look around a few likely contenders and she is very keen on the BMW 1 series.
She does about 8,000 business miles and 4,000 private miles a year. At the moment she claims 40p per mile back from her own business for this.
Now, this is the question.
What would be the best, most economical solution for us to get her a new or newish vehicle?
We can't decide if we should purchase a 2 year old model privately and continue to claim mileage as before.
Go for a new vehicle and use a PCP, lease or business contract purchase. or indeed is there another option I have not thought of?
Mainitaining the status quo is not viable! Her Skoda has been much more expensive to run than expected and can't be relied upon, hence the reason she wants/needs to change. That said I will be getting the Skoda and my old Mondeo will be going to the auctions.
Any advice is much appreciated!
Going surfing now and the outside air temperature is reading -4. Sea temperature 8.
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To a certain extent I think it depends on your view of risk. The second hand route will work out cheaper but some would argue with more risk. Be careful how you account for the car re. the business. If it is bought through the company and then issued to your wife as a company car it will incur personal tax. If, however, she funds it privately and charges mileage to the company it won't incur personal tax.
For what its worth I am in a similar situation and I choose to buy second hand cars and charge mileage. I find this the best formula for my circumstances but some would take an alternative view.
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>>business contract purchase>>
I run my own business and do the same sort of mileage, though a little less business and a little more personal, as your wife.
I reckon running the car personally is the better bet because so far this tax year I have done about 5000 business miles thus claiming in effect £2000 tax free against actual fuel costs of about £500, OK I cannot claim VAT on servicing and tyres etc though that only totals about £50 to 70 p/a.
On an older higher mileage car like mine depreciation is not an issue though even on a new car 8000 business miles out of a total of 12000 will account for little depreciation, of course once you get up to higher business mileages the depriciation hits and you cannot claim 40p/mile for all of, say, 30000 business miles p/a.
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Cheddar - According to my accountant I can and indeed do claim a pro-rata ( percentage of total mileage business versus pleasure based equation ) proportion of the VAT on servicing and tyres even though the car is privately owned. Also you can claim the VAT back on the business mileage albeit not at the 40p rate I charge the business for the first 10 thousand business miles in the year ( 25p a mile after 10k ) but you can charge the VAT on the actual fuel cost element of that, in my case at a rate of the VAT on 10p per mile whether those miles fall in the first 10 thousand or later. In other words you can claim back circa 1.5p per business mile in VAT for any business mile even if the car is a private one. Have a chat with your accountant. Mine says it's fine.
Best Rgds SS
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Have a read of HJ fiat 500 review. Not because you might want that car (well you might, I would have one ahead of a 1 series, but I digress), but because he explains how the cost of low CO2 cars can be off set 100% against the company's taxable profits.
I think there are both A3 and 1 series models that have been tuned to kick out less than 120g/km
You need to do the sums but worth a look
Edited by nick1975 on 16/02/2008 at 16:41
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Thanks SS, though I think I was advised to the contrary, now if you can claim depreciation proportoinately hmm!
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Sadly no - no such thing as free lunch! Depreciation can only be offset if you run it as a "company" car.
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Many thanks for the views and useful information. On balance it is looking more likely to purchase a used car privately and claim the mileage, etc.
Thanks again for taking the time to comment.
Patrick
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Bear with me, the grape has addled my brain. However, the facts are:
1. The self employed can claim 40p per business mile (for the first 10K) as a deduction from profit. No depreciation can be claimed as the 40p covers all costs (except finance).
2. If you are vat registered you CAN NOT claim the 40p rate as above unless you started before becoming vat registered. If this is the case you must claim for the actual business cost ie: the business percentage of all the costs of motoring, including depreciation. This is where you win with a low emissions vehicle as you can offset the business proportion of the WHOLE cost in the first year, rather then the normal 25%. You do need to bear in kind that you will have no further depreciation to claim in future years, though, and the vehicle has to be brand new to qualify.
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