Tax planning advice for when buying your new businesses cars.
Tax planning advice for new business cars is important.This because vat on company cars represents one-fifth of the cost of the car, When a business buy company cars that are used mainly for business, at times they are usually not the cheapest new cars, this might be for several reasons known to the company, but cars are still necessary for our business.
Vat on company cars is usually charged at 20% on the car value whether the car is leased or bought.
For example, The car value of an Audi A3 is £20,000( vat exclusive). When vat is added, the total cost would be £24,000. This means the input vat you could reclaim on this new business car is £4000.
In this article, I would be discussing on tax planning advice that can be put in place to ensure that when you buy your brand new car, you would be able to reclaim VAT on business cars that are used mainly for business and this would reduce the cost of the car to your business
1. Advice on the use of the new car
These cars must be used only for business and have no private use element. To ensure that your staff uses this car just for business only. The company can include in their contract, clauses that prohibit them from using the car for private use
2. Advice on the business car insurance
When the business company cars are bought, business car insurance on them must be solely for business, By doing this you are making it impossible for the new car to be used for private use.
Also, this could serve as proof with HMRC that the cars are used solely for business.
3.Advice on the mileage sheet or tracker
The company must keep a mileage log on these cars to show the business journeys made. Keeping proper and regular checks on these. Alternatively, you can attach a mileage tracker on these cars so has to have a more accurate record.
4.Advice on where to park the business car.
These cars must be parked on business premises by the end of business day. They must never be parked overnight in the house of the directors or employees.
These savings can be increased by the numbers of new business cars that you would have to buy.
By taking on the steps and advice stated above
You can reclaim vat on new cars by putting in place all these steps that would ensure that the cost of the business cars to you is reduced.
For further advice, we could provide you advice that is bespoke to your business and saves you tax on vat on your cars.