Over the last 5 years, the lifestyle truck (with seats in the back) has become an incredibly popular vehicle choice for those involved in the constriction/engineering field but also for company directors considering their tax position on a car/van through their limited company.
As contract hire and leasing has become more popular, so has the queries about how to do this – can I lease a car through my company? can I lease a van through my company? how much tax will I pay for a car/van lease?
The first point to note is that HMRC treats a car and van differently for the purposes of taxation. So long as a company can obtain credit with one of our finance companies, it is possible to lease a vehicle. I
f the company does lease a car, then the individual who benefits from the car (employee or director) must pay company car tax.
Put simply, the more polluting and expensive a car is, the higher the percentage of BiK is (up to a maximum of 37%).
Additionally, any diesel cars which do not meet the Real Driving Emissions Step 2 (RDE2) will incur a 4% supplement until April 2021.
These considerations are important for directors particularly, as their income tax brackets are likely to be at 40% and higher.
This essentially means that if they decide to take a car through their company, this is not a “free” resource. There will be a taxation penalty. Every month, you must deduct (from source) the tax liability for the car – if you are in a high value polluting vehicle, this is going to have cost consequences.
This is where directors will often look into the conundrum – should I lease a car through my company or personally? Which is better?
In the alternative, some employees/directors will look into a van or pickup on lease. So why are people looking into commercial vehicles to lease instead? As a commercial tool, HMRC treats these vehicles differently. For example, a company purchasing (rather than leasing) assets can claim 100% write down up to a limit of £200,000 each financial year. Additionally, for commercial vehicles, so long as there is no private use, a company can claim 100% of the VAT on the vehicle, so long as they are VAT registered. This is not possible with a car UNLESS it is classed as a pool vehicle. Just be careful with a “pool vehicle”, as HMRC operates strict guidelines on how this operates – it is not there for tax evasion!
With regard to a “commercial vehicle” your traditional white vans are put into this category although for lifestyle models with windows, do be careful as they can lose their status. For a pickup truck to be classed as a commercial vehicle/van for Vat and BiK, it must have a payload of 1000kgs or more. If you are adding accessories which affects the payload, you need to be careful, as it might be re-classified as a car.
What are the tax rules on a van? Unlike a car, which is emissions-based, a van receives a taxable benefit for each financial year – for 2018/19 this is £3,350 plus a fuel benefit of £633 per year.
So in the case of a 20% tax payer, the yearly tax liability would be £797 and for a 40% tax payer this would be £1,593.
As you can clearly see the, the tax liability on the pickup is considerably less for a higher tax payer – for those incurring a 40% income tax rate, they are paying circa £150 per month in contrast to a car which would be anywhere from £350-£700 per month (without taking into account more powerful/prestige vehicles). One key point is that a pickup does not drive in the same way as a car; notwithstanding the fact that they offer a much better personal tax position, for some drivers this might not be the suitable option? To combat this, many manufacturers are offering higher-value pickup options which include modern comforts – leather, heated seats, reversing camera, parking sensors, cruise control and alloy wheels.
For any driver covering less than 10,000/15,000 miles, this may meet their requirements.
In terms of the vehicle shown here, the Mitsubishi L200 DIESEL Double Cab DI-D 178 Barbarian 4WD Auto, this is based on the following specification:
· Black Metallic paint
· Leather – Black
· 17″ alloy wheels
· Bed liner – under rail
· Tonneau cover – hard type
As standard the vehicle includes rain sensors, privacy glass, brake assist, hill start assist, trailer stability assist, heavy duty suspension, lane departure warning, cruise control, rear view camera, 4WD drivetrain indicator, smartphone link, auto dimming rear view mirror, electric heated and folding door mirrors, start/stop button, Apply CarPlay/Andorid Auto, DAB, chrome mirrors/handles/tail gate handle, illuminated door guard entry, mudflaps front and rear, bi-xenon HID headlights, LED daytime running lights, LED puddle lamps, climate control, leather steering wheel, leather upholstery, emergency stop signal system, 4-way adjustable electric driver seat, heated front seats, keyless operation system, Thatcham cat 1 alarm, 17” alloys and full size spare wheel.
On the technical-side, company car and business users can note the list price at £28,075.00 and CO2 at 196g/km. The 2442CC 5 speed auto diesel engine delivers 37.7 combined MPG, 178ps and 0-62 times of 11.8 seconds. Service intervals on an L200 are every 12 months or 12,500 miles ,whichever lands sooner.