Company Cars... Pros & Cons
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Is it worth buying a car through a company?
Ok the answer is likely to be no however it depends on your marginal rate of tax, what car and what type of fuel, whether you buy the car on finance, the posibility of leasing etc.
If we take a Ford Focus 1.4 for example
Cost
Retail price £12000 benefit in kind for its CO2 (18% of £12k =£2160) therefore cost to you at 22% is £475 pa
Class 1A Ni payable would be at 12.8% of £2160 = £276 which is offset against profits so net cost is £175
Offset the saving
Capital Allowance in yr1 is £3000 at 19% = 570
yr2 is £2250 at 19% = 428
yr3 is £1688 at 19% = 321 therfore average is £440
howver as a company car you would be able to put through car tax, insurance and maintenance against tax. To break even this figure would have to be £210/19% = £1105 pa so the costs will possibly come to more than this.
So overall in this scenario you may be marginally better of as a company car.
If the car was run on LPG you would be even better off!
However if your marginal rate of tax was 40% then the cost outlined above would be £864 which even with all the other costs (tax, maint etc) would not be beneficial(breakeven in this case would have to be (864-440)/.19 = £2232)
As a company car you would not be able to reclaim vat on the purchase.
Go much higher than this eg a mondeo (at say £15000 and a benefit % of 23%)and the answer is likely to be a definate no as the capital allowances claimable would be restricted to the lower of £3000 or 25% of the written down value.
So as you can see it all depends on specific cases.
VAT implications of Leasing a Car through a Company
If you decide to purchase a car via a company, there are a few other advantages that you should be aware of. Firstly if your company is VAT registered you are able to claim 50% of the VAT paid on the monthly leasing costs.