Buying a Company Car in 2019?

Are you considering buying a Company Car in 2019 ? Check out this week’s Contractor Tax Tip packed with answers on the most frequently asked questions on Company cars.

Can I purchase a vehicle through my limited company?

Yes. The Company may purchase a vehicle once it is for business use.

Can I utilise the vehicle for my own private use?

Yes. You may drive the vehicle for both business and personal use.

Are all the expenses relating to the running costs of the vehicle allowable as business expenses in my Limited Company?

If the vehicle is owned by the company then all expenses relating to the vehicle can be expensed through the company.  These include fuel, repairs, insurance and tax.

Can the cost of purchasing the vehicle be written off against Corporation Tax?

You cannot claim the full cost of the cost of vehicle in 1st Year of Purchase. Should you purchase a vehicle outright, you may claim capital allowances (Depreciation) at a rate of 12.5% (capped at 24,000 in some cases) of the vehicle cost each year you own the vehicle.

I am thinking of purchasing a Van or Commercial Jeep – Can I expense this?

Yes. It is treated same as other vehicles; however, it will not have the same restrictions as passenger vehicles, i.e. €24,000 limit.

I have heard that I may have a Benefit-in-Kind (BIK) charge if I buy a company vehicle. What is Benefit-in Kind?

BIK is a tax charge on an employee or Director where they have a company vehicle available to them for private use.

How is BIK calculated?

It is calculated by taking the OMV (Original Market Value) of a vehicle and multiplying it by 30%.

OMV = €40,000 Rate = 30% BIK = €12,000 (Cash equivalent)

If I buy my vehicle second hand is my BIK reduced?

No. It is calculated on the price when purchased new.

My BIK Cash Equivalent is calculated at €12,000, does that mean that I pay an extra €12,000 in tax?

No. €12,000 is the taxable benefit attached to the private use of the vehicle and you will be pay tax on €12,000 cash equivalent at your marginal rate of tax.

BIK: €12,000

Marginal Rate: 52%

Tax charge: €6,240

Is there any method of reducing my BIK?

Yes.  Should you have a high amount of business travel, your BIK rate may be reduced. Travelling to and from your normal place of work does not count towards business miles.

I am a Professional Contractor and my home is my Company registered address, can I not claim from my business address to my client site?

If you have a Contract for Service in place with a client and it is stated that you attend work on their site or by arrangement you carry out duties there, then the client site would be classed as your normal place of work.

If I purchase a commercial Jeep or Van, do I still have to pay the BIK?

Yes. However, for commercial vehicles and vans the rate of BIK is reduced to 5%.

Is there an exemption for electric vehicles?

The Finance Act 2018 allows for an exemption to BIK on electric vehicles for the year 01/01/2019 to 31/12/2021. The Vehicle Value limit is set at €50,000 OMV

I am in an Umbrella Company. Can I purchase a Vehicle through this company?

Unfortunately vehicles cannot be purchased through these company structures as they are shared with other members and the disposal of vehicles at end of Contract can be complicated.

I want to purchase a vehicle through my company – What should I do next?

You should contact your Icon Accounting Account Manager and we will give you a guide on the BIK calculation as this will enable you do a cost-benefit analysis.

Summary

In many cases it is not tax efficient to purchase a passenger car through your Limited company due to the onerous levels of BIK. In these cases, the reimbursement of travel expenses through Civil Service Mileage rates is more efficient. If you are doing a large amount of business travel or wish to purchase an electric or commercial vehicle it can be very efficient and one of our Accountants will be happy to go through this with you.

For more information, please contact Icon Accounting on 01-8077106 or via email info@iconaccounting.ie and we will be happy to help!