A company car is a vital asset for businesses in many industries, so it is important to be aware of what your different options are when the time comes to make a purchase so that you can make the right decision for your business and find a car that suits your needs.
There are many reasons why a business might need a company car and identifying what these needs are is important for making the right decision when it comes to ownership. Some businesses will rely on the vehicle as part of the operation, such as a delivery driver while for others it could simply be as a way to get from A to B.
The key benefits of purchasing are that the vehicle is yours to keep so it can be branded and there will be no mileage limitations in place, but keep in mind that purchasing could affect cashflow and you must also factor in deprecation which could see you make a loss if you decide to sell the car down the line. You will also need to arrange adequate protection for the vehicle. Buying through your company allows you to claim Capital Allowances to gain tax relief – this will depend on the vehicle’s CO2 emission levels.
A good alternative to purchasing which will work for many businesses is leasing. With a lease, you never technically own the car and this means that you avoid depreciation and can upgrade to an even newer car every few years. While this has its benefits, you must also keep in mind that you will not be able to modify the car so you could not put your logo on the vehicle and there are likely to be restrictions in place. Leasing through a limited company allows payments to be claimed as a business expense but there is a flat rate disallowance of 15% for cars with CO2 emissions of over 110g/km.
Business Use Only
Another option is to buy a car personally to use only for business purposes. The tax rules are simpler for this option and you can claim tax-free allowance from the company for business mileage. The initial outlay or financing costs are not tax deductible if you buy the car yourself, though.
Company Car Allowance
Businesses may provide staff with a company car allowance which can go towards the purchase of a car – in this situation, tax and NI contributions would be deductible using the PAYE rule through the company payroll.
Hopefully, this information will be useful and allow you to find the right option for your business.