Company vehicles – Leasing, purchasing or renting?
How to buy a company car or vehicle for use in the business is one of the most frequent queries posed to us. Unlike other more industry or size specific tax queries, vehicles form a common theme across all size and types of business. Here we look at the options for purchase in a bit more detail.
Simply, there is no definite answer to the question because every company has their own business model and structure. Most company vehicles are purchased using one of the following methods or agreements:
- Outright Purchase
- Contract Hire
- Finance Lease
- Hire Purchase
- Daily Rental
The CO2 emissions are the one constant factor which directly affect tax liabilities and capital allowances regardless whether you buy or lease.
If you choose to buy a vehicle there are three bands of CO2 emissions that are worth considering.
Vehicles with an emission of 95g/km or less attract 100% capital allowance in the year of acquisition provided the vehicle is brand new.
From there onwards the capital allowance reduces within CO2 emissions of 96g/km to 130g/km and then again from 131g/km or greater.
Please remember even if you are VAT registered, you cannot claim VAT on the purchase of a car. This is only possible for vans.
Company Directors buying a car through the company will be liable to a P11D benefit in kind. The actual charge is determined by the CO2 emissions too and within certain bandings so please be aware.
By choosing Contract Hire and Leasing agreements CO2 emissions under 160g/km attract the greater allowances.
For VAT registered businesses you are able to claim elements of the VAT but this varies between different agreements and services within them.
As mentioned, every company is different so please talk to us before making a decision and we can look the right option for your particular circumstances. You can then use tools like the CO2 based car search here to help you find the cars or vans which suit your personal/business tax position.
Our thanks to Chris from Pinksauce vehicle leasing in Chichester for helping with this article.