Corporation Tax Question

[Remedy234]

Hi I’m new to the forum and interested in buying a Taycan, my first Porsche.
I run a small Ltd business turning over around £250k. Only myself and wife as employees (directors)
My CP is only usually around £10-£15k so my questions probably have obvious answer’s, can I even afford a brand new Taycan (£93k) on a PCP? I’ve around £25-30k I could put down I guess. I’d rather buy used and miss out on the huge depreciation to be honest but then I miss out on the tax benefits.

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[Persuader]

The only tax benefit you would miss out on is the opportunity to offset 100% of the purchase price against pre tax profit. But with this you have to add back to your profit the proceeds when you sell it anyway.
You can still claim 18% per year write down allowance with a used vehicle.

 

[gramorris]

Yeah this. You can buy used but you can’t get 100% relief in the first year. It’s 18% annually and then a balancing amount when it’s sold.

e.g. 80k purchase in first year you get relief on 14.4k value. Year two you get relief on 11.8k value (18% of 80-14.4) etc.

Speak to your accountant. You can put accessories, maintenance, insurance through the business too.

 

[Remedy234]

I had this from my accountant regarding buying used if it helps -


Year 1 = £60,000 car x 18% = £10800.
This will then be deducted off your profit so saving 25% = £2,700

year 2 = £49,200 (£60,000-£10,800) x 18% = £8,856 saving £2,214

year 3 = £40,344 (£49,200-£8,856) x 18% = £7,261 saving £1,815

if I bought new do I have to claim the whole 100% in year one or could that be split over the finance period, say 25% each year ?

 

[Persuader]

Hi. If you buy new you can claim any % up to 100% write down allowance in the first year. In the 2nd and subsequent years you can then claim 18% each year of the remaining written down balance.
I myself purchased new in 2020 but chose to only claim 18% in the 1st year (and obviously each subsequent year). My cars written down value is now just under its actual value so if I sell it there will be less of a "charge back profit".

 

[Jaybee]

I'm still undecided whether to buy used as prices have dropped a lot but miss out on the 100% capital gains perks - or buy new, get the capital gains perks but potentially lose £20k-£25k in depreciation as soon as I drive it off the forecourt.

How do things work when its time to get rid of a company car?
Do you pay the tax (I'm a 40% payer) of what you actually sell the car for?
So if its worth, £50k when its time to sell, do I pay 40% tax on that £50k?

 

[Murph7355]

There is no capital gains perk.

The Corp Tax write down of 100% is more tax deferral really. Plus not paying tax on depreciation (which at the moment could be handy, but isn't just applicable for 100% write down).

If you make 100k profit and buy a 100k new/demo car, you can offset the lot and pay no Corp tax that year.

If you sell the car the next year, the proceeds get added to your profit. So if you make 100k again, and sell the car for 70k, you pay Corp tax on 170k.

There are lots of threads on here asking similar, but the only sensible answer comes from your accountant. There are lots of factors to consider.

If your accountant doesn't know how to cover that, get a new accountant before a Taycan .

 

[Remedy234]

Not sure this bits true
“If you make 100k profit and buy a 100k new/demo car, you can offset the lot and pay no Corp tax that year”

 

[Persuader]

Murph7355 is correct.

 

[andyd]

The 100% first year write down catches up with you eventually.
The BIK and the cost of fuel are the big financial benefits. I reckons I'm saving up to 15k per year on 120k car roughly, that's without the free or occasional very cheap fuel.

Hi I’m new to the forum and interested in buying a Taycan, my first Porsche.
I run a small Ltd business turning over around £250k. Only myself and wife as employees (directors)
My CP is only usually around £10-£15k so my questions probably have obvious answer’s, can I even afford a brand new Taycan (£93k) on a PCP? I’ve around £25-30k I could put down I guess. I’d rather buy used and miss out on the huge depreciation to be honest but then I miss out on the tax benefits.

 

[Remedy234]

I currently pay zero BIK on a commercial vehicle (Nissan Navarra) but around £5k in diesel / parking. I could charge the Taycan for free and rarely do more than 30 miles a day.
What the heart desires rarely matches what the head says.

 

[gramorris]

The 100% first year write down catches up with you eventually.
The BIK and the cost of fuel are the big financial benefits. I reckons I'm saving up to 15k per year on 120k car roughly, that's without the free or occasional very cheap fuel.

Depends. One other thing to bear in mind, if you take the 100% write down at the current 25% corp tax rate and the government puts it back to 19% in the future you will only pay 19% corp tax on the sale.

Also, if the car is for personal use the major saving is actually getting the car before personal tax not just saving the corporation tax on depreciation but then another 40%.

 

[andyd]

Yeah, youre right The tax percentage could have an effect for recently bought cars.

Point 22 is what I mean by BIK. The saving is massive. I worked out around 15k per year for me at the moment.

Depends. One other thing to bear in mind, if you take the 100% write down at the current 25% corp tax rate and the government puts it back to 19% in the future you will only pay 19% corp tax on the sale.

Also, if the car is for personal use the major saving is actually getting the car before personal tax not just saving the corporation tax on depreciation but then another 40%.

 

[Dabz]

When you come to sell the car...if you part-ex for another then you will have a further corp tax saving then. eg. sell taycan to the dealer for 40k (generating corp tax of £10k), but buy another new one for 100k (offsetting 25k of tax)...

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