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Post by Tim on May 9, 2017 9:06:51 GMT
We've resolved the car allowance issue, apparently to the satisfaction of all involved.
So now comes the first decision about replacing one of the leased cars. Someone who has a company car that is due for replacement in October has decided he wants an Audi Q5. The approved monthly cost for his role is £400.
Should he take that as an allowance and source his own car or is it still best for him to do it through the firm (I think he'd get a better deal doing it the latter way).
Also, should he go for diesel, in light of rumblings of a scrappage scheme and a move against them, or should he go for petrol?
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Post by johnc on May 9, 2017 9:59:57 GMT
That is far more than a one line answer.
If he gets £400 more in his wage packet every month (and pays tax and NI on it), then he will have perhaps £232 in his hand to fund his new car, incl road tax, fuel, insurance, servicing, repairs etc. However on the flip side, he won't have a car benefit in kind which might leave him £200 or so better off a month in tax. He will also be able to claim 45p/mile for business use since it is his car.
If he goes down the route of the company leasing the car for him, then it becomes a company car again and the road tax, insurance, servicing and repairs will all be paid by the business but he will be subject to a benefit in kind for the car and restricted to the lower HMRC fuel rates to re-imburse him for the fuel used on any business journeys. His benefit in kind will be based on a calculation using the car's CO2 emissions and it's manufacturer's list price when new, incl all extras added. To minimise his benefit in kind he will need to look at the different cars, their CO2 emissions, their list prices and the cost of any extras he wants. It is sometimes cheaper to get, say an SLine which has leather and parking sensors instead of a Sport, to which you add those extras. Diesels will have lower CO2 emissions so a lower benefit in kind and a higher list price but they are still normally better for company car drivers. On the other hand if he is buying (or leasing) his own car he has different choices - he could just go for the lowest lease deal or if he wants to keep it longer term he will need to factor in things like resale value and the diesel scrappage scheme.
To give an idea of benefit in kind charges, a petrol which has CO2 emissions between 110 and 114 would have a benefit in kind percentage of 21% (i.e. this percentage is applied to the list price to get the taxable benefit). A diesel with the same CO2 emissions would have a percentage of 24%. The CO2 goes up/down in 5g/km bandings and the percentages rise/fall by 1% for each banding.
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Post by Tim on May 9, 2017 10:47:20 GMT
Thanks John I've never been actively involved in the acquisition process for company cars, I've just landed the fleet manager role because I'm the company accountant and they think that's a role that qualifies you for looking after the fleet for some reason plus the CEO said " you're a petrol head"  Not sure that's particularly helpful to anyone really. I've told him to speak to Audi and see what it is he thinks he wants and I'll help him where I can from there. |
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Post by Deleted on May 9, 2017 14:27:41 GMT
Thanks John I've never been actively involved in the acquisition process for company cars, I've just landed the fleet manager role because I'm the company accountant and they think that's a role that qualifies you for looking after the fleet for some reason plus the CEO said " you're a petrol head" Not sure that's particularly helpful to anyone really. I've told him to speak to Audi and see what it is he thinks he wants and I'll help him where I can from there. I think you are the perfect person and should insist everyone runs leggy BMW diesels from now on. £400 maximum budget, not monthly budget. |
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Post by Tim on May 9, 2017 14:37:21 GMT
 Now you mention it I have been looking at E60 M5s and wasn't as scared as I thought I should be by the 140k ones!! I wish I'd kept the last 320, seeing how far it would go on the original clutch would've been interesting (210k when I had it).
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Post by racingteatray on May 9, 2017 16:40:44 GMT
That is far more than a one line answer.
If he gets £400 more in his wage packet every month (and pays tax and NI on it), then he will have perhaps £232 in his hand to fund his new car, incl road tax, fuel, insurance, servicing, repairs etc. However on the flip side, he won't have a car benefit in kind which might leave him £200 or so better off a month in tax. He will also be able to claim 45p/mile for business use since it is his car.
If he goes down the route of the company leasing the car for him, then it becomes a company car again and the road tax, insurance, servicing and repairs will all be paid by the business but he will be subject to a benefit in kind for the car and restricted to the lower HMRC fuel rates to re-imburse him for the fuel used on any business journeys. His benefit in kind will be based on a calculation using the car's CO2 emissions and it's manufacturer's list price when new, incl all extras added. To minimise his benefit in kind he will need to look at the different cars, their CO2 emissions, their list prices and the cost of any extras he wants. It is sometimes cheaper to get, say an SLine which has leather and parking sensors instead of a Sport, to which you add those extras. Diesels will have lower CO2 emissions so a lower benefit in kind and a higher list price but they are still normally better for company car drivers. On the other hand if he is buying (or leasing) his own car he has different choices - he could just go for the lowest lease deal or if he wants to keep it longer term he will need to factor in things like resale value and the diesel scrappage scheme.
To give an idea of benefit in kind charges, a petrol which has CO2 emissions between 110 and 114 would have a benefit in kind percentage of 21% (i.e. this percentage is applied to the list price to get the taxable benefit). A diesel with the same CO2 emissions would have a percentage of 24%. The CO2 goes up/down in 5g/km bandings and the percentages rise/fall by 1% for each banding.
I am endeavouring to understand that. But I think it boils down to "take the money and do your own thing"...? |
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Post by johnc on May 10, 2017 11:38:28 GMT
I am endeavouring to understand that. But I think it boils down to "take the money and do your own thing"...? It's tax so it depends! He could have between c£420/mth and £600 (depending on his current benefit in kind tax charge) to buy, run, insure and repair the car if he buys his own. Plus he will get a mileage allowance for business fuel.
If he takes a company car (Q5) he can have an SLine 2.0TDi for list of £40,035 and CO2 emissions giving a benefit in kind of 28% or an SLine 2.0TFSi for list of £40,800 and benefit in kind percentage of 30%. That equates to a taxable benefit of £11,209.80 for the diesel or £12,240 for the petrol. As a 40% taxpayer that would cost £4,483.92 for diesel and £4,896 for petrol which in round terms is around £400/mth before you add any extras.
However it gets worse. If the Q5 lease cost is say £500/mth and he gets a company car, he will have to pay £100 towards the cost, out of taxed income because it exceeds the £400 monthly limit, making the round sum cost to him about £500/mth. It is a massively complicated area and almost impossible to get "right" because there are other variables such as the retained value in a vehicle if he buys his own - on the basis of the last Q5, expect it to hold its value very well, making the ownership option a bit more attractive. Also if he is prepared to buy a one year old car, he could have a considerably nicer car at the same money or the same car at less monthly outlay.
This is a bit like a Doctor being asked to give a diagnosis when all he knows is that the guy isn't well.
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Post by Tim on May 10, 2017 12:14:48 GMT
As well as the above a leased car will have maintenance included making the calculation a bit easier (as its a fixed cost per month) whereas if he bought the car himself he'd have to pay that out of his own pocket.
We're looking at paying the 11p/mile whichever option the individuals take.
I've just checked his mileage claims and from 1st August to 31st March he did 3,220 miles so only 400/month.
It looks as if the chances are that whatever decision he were to make it would end up costing a similar amount assuming he chose the same car each time.
He's a 40% taxpayer and a financial planner so I'm going to leave it to him to work out......
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Post by Roadsterstu on May 11, 2017 22:17:27 GMT
Would it be cheaper if he ran either a hybrid/full electric vehicle or, as another scenario, a commercial vehicle such as a double cab pick up?
It's not a suggestion, just a random thought.
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Post by johnc on May 12, 2017 9:16:46 GMT
Would it be cheaper if he ran either a hybrid/full electric vehicle or, as another scenario, a commercial vehicle such as a double cab pick up? It's not a suggestion, just a random thought. In a word, Yes.
Electric/hybrids have lower CO2 emissions therefore have a lower percentage to apply to the list price to determine the benefit in kind.
Double Cab Pickups are treated as commercial vehicles, provided they have a payload of at least a ton and you can have the vehicle and all your fuel and running costs paid, for a benefit in kind of £3,840 for 2017/18. That would only cost a 20% taxpayer £768 for a years use of a nice vehicle and all his fuel provided for all purposes. A higher rate taxpayer would pay double that.
However HMRC are beginning to question whether such a vehicle is required and if they determine that, say, a Solicitor has no need for a large 4x4 commercial vehicle to transport his briefcase around, they could refuse to treat it as a van benefit. The Solicitor I am sure would be able to show that he had to take large quantities of files to Court or for scanning and destruction every now and again and that the vehicle was required to ensure that such tasks could be carried out as required at short notice and at convenient times!
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Post by Tim on May 12, 2017 10:46:07 GMT
Would it be cheaper if he ran either a hybrid/full electric vehicle ..... Yes, except then he'd have to choose something other than the Audi Q5 his wife has set her heart on |
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Post by grampa on May 12, 2017 16:20:51 GMT
Thanks John plus the CEO said " you're a petrol head" In my company car days the MD was a petrol head - it didn't mean we really went down to the sensible route to buying vehicles - great for me because it was the easiest thing in the world to push the budget and get the kind of car that I really wanted rather than the kind of car a fleet policy would push you towards. He'd say, "Well having a company car is not really a benefit if you have to get something you don't really want." |
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Post by Tim on May 17, 2017 13:55:26 GMT
Just to finish this off, the car has been chosen.
After a flirtation with a Q5 and the realisation it'd cost a fortune in tax, followed by the discovery that doing it privately would cost more the individual concerned has settled on a Merc C350e AMG Line estate in caravansite blue.
List price is £41,460 meaning he'll pay an extra £310 per year in road tax but to offset that it's rated at 53g/km of C02.
While that's probably a load of bollocks I expect this person to get closest out of most people as he is very fastidious and will undoubtedly plug the car in every night to get the benefit of the electric propulsion.
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Post by Martin on May 17, 2017 16:07:19 GMT
Caravansite Blue!  |
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Post by Tim on May 22, 2017 13:00:23 GMT
I've just spoken to the user-chooser and after a test drive the Merc has been ruled out.
He said the seats were poor, too low, too flat and too hard with no under-thigh support and even with a fairly high spec on the demo car no ability to tilt the seat.
I've suggested the BMW equivalent (330e?) because I know that the seats in our 320 have a tilt function and extendable seat base.
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