A Guide to Purchasing a Vehicle through your Limited Company

We get many questions from our clients in relation to purchasing a company vehicle via their Limited Company. Therefore, below is we have outlined the most common questions we receive and the BIK implications.

Q. Can I purchase a vehicle through my limited company?

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

Q. Can I utilise the vehicle for my own private use?

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

Q. 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.

Q. 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% of the vehicle cost each year you own the vehicle.

The calculated value is limited to €24,000 in Vehicles with CO2 Category A, B & C.

It reduces for Category D & E by 50% and is not allowable for Category F & G.

Q. Can the cost of leasing a vehicle be written off against Corporation Tax?

Yes. These payments can be fully written off however they may be reduced pro-rata if vehicle cost exceeds €24,000.

Q. If I purchase vehicle for greater than €24,000 can it still be paid for by company?

Yes. It would just mean you would have a Corporation Tax charge of approx. 12.5% of the difference over the period of the purchase, so it would still make sense.

Q. 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.

Q. 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.

Q. 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)

Q. What is OMV?

OMV (Original Market Value) is the cost of the vehicle if it was purchased new.

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

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

Q. 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: 49%
Tax charge: €5,880

Q. Is there any method of reducing my BIK?

Yes. Should you have a lot of business kilometers then you may reduce the BIK % as per below table:

Business Mileage Lower Limit
Business Mileage Lower Limit
Percentage of Original Market Value
Kilometers (KM)
Kilometers (KM)
Per Cent %
0 24,000 30
24,001 32,000 24
32,001 40,000 18
40,001 48,000 12
48,0001 & Over 6

Q. What is classed as Business Mileage?

Business mileage is mileage incurred in the normal course of business. This could include traveling to appointments, business meetings and traveling to temporary work sites.

Traveling to and from your normal place of work does not count towards business miles.

Q. 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.

Q. 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%.

Q. Is there an exemption for electric vehicles?

The Finance Act 2017 allows for an exemption to BIK on electric vehicles for the year 01/01/2018 to 31/12/2018.

Q. 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.

If you wish to purchase a vehicle, please contact Icon Accounting and we can arrange to set you up with your own Limited company to organise.

Q. 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.

When purchasing you need to register the vehicle in the company name rather than your personal name.

Synopsis:

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.

The Revenue commissioners have recently updated their Tax Briefing.

We are expecting Revenue to do a full review of BIK on Motor Vehicles in 2018, with changes to the BIK structures expected for diesel and petrol vehicles. On the flip side the Minister for Finance is expected to extend the Zero BIK rate for electric cards to 3 years in Budget 2019.

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