Unfortunately, there is no straight forward answer to this question. One of the main factors to consider here would be whether or not you will be using the car privately or just for business.
Leasing a car with no private use availability – pool car
This would be the most tax efficient scenario as the lease payments, along with the fuel would be an allowable expense in the company accounts.
In this case the car must be driven on company business only and not be available for private use. The car should be kept at the business premises and not driven to and from home and H M Revenue & Customs would expect the car to be available for other employees to drive so it should be insured on this basis.
Leasing a car – available for private use by you
If the car is available for private use, e.g. you drive it home or use it privately at any time then the lease payments would still be an allowable expense in the accounts, however you would be receiving a taxable benefit in kind.
How much this benefit is would depend on the list price of the car and the CO2 emissions. Unfortunately, the benefit charges have increased in recent years to try and discourage company cars. If your personal overall earnings are under the higher rate threshold, you will pay tax at 20% on the car benefit, if over, you will pay tax at 40%.
Furthermore, the company will pay Class 1A national insurance at 13.8% on the car benefit and it will need to complete a Form P11D each year.
With regards to fuel you will need to either record your private journeys and reimburse the company for the fuel or pay for fuel privately and reclaim business journeys made from the company at the approved rates. If you do not choose either of these options, you would be receiving a further taxable benefit.
The VAT implications also differ between the above scenarios. For further information we would recommend seeking assistance from a qualified accountant.
For further advice on this subject and any other area of accountancy or taxation, please contact Sam Carter from our Hastings office on 01424 720222 or email firstname.lastname@example.org or Louise Franklin from our Bexhill office on 01424 730300 or email email@example.com
Member since: 25th November 2014
I work for Ashdown Hurrey, where I qualified as a chartered certified accountant in February 2014.
I joined the practice after completing my degree in accounting and finance at Manchester Metropolitan...