Can I have a company Car? Ferrari will be nice..

4b9039 6f03f73d2cb049efbf08602a34246199.jpg srz p 250 164 75 22 0.50 1.20 0.00 jpg srz Can I have a company Car? Ferrari will be nice..


Working shareholders and directors will want the company to meet the costs of all expenses which could be said to have a business connection. An example is a company car.
Most of the time as a women accountant/entrepreneur I can relate to business owners –as it makes total sense that an expensive car adds to your reputation like carrying a Michael Kors bag does it for me!!Although the directors can claim tax relief under the general rule; it must be the expenses which are incurred wholly exclusively and necessarily for the performance of duties of employment- this is very restrictive term. (ITEPA 2003)
I would fail to justify buying designer bag on the company credit card to HMRC as expense incurred wholly, exclusively and necessarily for the performance of duties of my employment.
Any benefits directors or employees receive through the company- is included as taxable benefit on P11D unless the benefit is:Exempt from income tax(eg- childcare vouchers upto £55 per week)
Wholly covered by a deduction under ITEPA 2003 (eg-professional training)
Hobby Assets :
Racing cars, yacht, helicopters and other similar assets purchased by owner managed companies are HMRC favourite. If a HMRC inspector knows about such assets within the company a full investigation will definitely follow.
Such assets are often dressed up to look like advertising or sponsorship but HMRC are frequently successful in proving that they are available for private use by the business owner. HMRC will seek to restrict the capital allowances on them and obviously charge tax on taxable benefit of private use of the asset which is usually calculated at 20% of the market value of the asset when it was first provided for private use.
Business owners generally end up regretting financing their personal expensive interests through their companies after they have been subject to HMRC investigation.
Maybe paying for holiday home in Spain from company account is a bad idea!! Damn!!
Company Cars:
When the company buys or lease the car for its employee- the taxable benefit is charged for the private use of a company car. And it’s very hard to prove the car is not available for private use unless it’s a pool car. Travelling from home to office is considered as private use.
The calculation of taxable benefit on a company car is based on the CO2 emission levels and list price of the car.
For e.g. a car with list price of £25000 and CO2 emission of 157g/km creates a taxable benefit of £6000 in 2014/2015(24% of £25000) and increases every year to £7000 (28% of £25000) in 2016/2017.
So the more expensive the car or higher the CO2 emission is – more taxable benefit for the employees including directors. The taxable benefit of company car can be calculated on HMRC company car calculator.It is worth noting that the price of the car is the sum of following:The published list price of the car when it was first registered – so no discount for older cars!!
Delivery charge
The published price of the accessories or optional extras provided subsequently

You may be tempted to buy an electric company car as the car benefit is currently zero, however from 2015/2015 the benefit for zero emission car will be 5% of list price rising to 8% in 2017/2018.

VAT recovery on purchase/lease of Car:
As a general rule – a company cannot recover the input VAT on the purchase cost of car. Where the car is leased 50% of the input VAT on lease payment is recoverable.(where the car is used partly for business and private purpose by the director/employee)
Where it can be demonstrated that a purchased car or leased car is genuinely planned to be used exclusively for business purpose, all of the VAT can be recovered.

Class 1A NIC:
And as owner managers we always forget about NIC on benefits. The Class 1A NIC is charged on most benefit in kind. Class 1A NIC is payable at current employer rate of 13.8% on all benefits including company cars unless the benefit is:

Exempt from income tax
Wholly covered by a deduction under ITEPA 2003
Covered by P11D dispensation notice
Part of PAYE settlement agreement
Received by lower paid employee for whom a P11D return is not required

So next time a sales person in Porsche showroom tries to tempt you with company car- please discuss it with your accountant before you sign anything!!

If you have any questions about Company Car Tax or anything else Tax related please give me a call on 0116 3677424 or email me at

Jit x


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