Company car for Ltd company in it's infancy.

luke_m_m

Long post warning…
The time has come to review the vehicle used for company business.
Previously we were using a privately owned vehicle and running mileage expenses, however this vehicle is no longer fit for purpose, and we are looking to go down the EV route all ready for the new tax year.

As a Ltd company in our infancy (we are 11 months old and this is our first trading year) we haven’t submitted accounts to companies house before, so securing a Business Contract Hire (BCH) lease isn’t possible, it’s not even possible to get a Personal Director’s Guarentte (PDG) on a BCH agreement - regardless of the fact that as a Director I also have a significant PAYE salary from another business and great credit history.

So a Personal Contract Hire (PCH) agreement is the only viable option.
As recommended, we (the two directors) have taken minutes to outline the requirement, the need for a PCH lease given the businesses credit infancy, and the plan to repay this personal lease on behalf of the director.

There is some shared use of this vehicle, and it’s acknowledged that it will be a Benefit in Kind, that the total value of the vehicle is to be listed in the P11D and that the business will need to pay NIC1A contributions at 15%.

The confusion is how to process all of this within Crunch and what’s a legitimate way to handle this.
I’ve recieved lots of mixed advice from accountants… I’ve been advised that this scenario is possible.

Capture minutes that outline the requirement, reasoning and agreement in principle.
Document all PCH lease paperwork and keep all details are kept in the company ledger.
The Business pays the deposit and monthly PCH agreement.
The Business logs the (pro rata) full list price (ex VAT) of the vehicle as a BIK in the P11D to the Director.

But then how should the monthly payments handled in Crunch, are:
A) They are logged as a Directors Withdrawl and part of the Directors Loan Agreement?
B) They are logged as an Expense against ‘Motor Vehicles Cost’.
C) Something else…

I’m part of a local business group where other Directors have shared that they have made this work (with the guidence of their accountants) but none of them use Crunch and know how I would log this appropriately.

Can anyone share any insight please?

Luke

Katie

Hi luke_m_m

I spoke to our accountants briefly and they asked if you’ve considered the following options:

Delaying purchase for a month in order to complete your first year accounts so creditors can finance based on year one results
Considering other finance providers besides whoever the car company recommends, to see if they will accept the director’s personal guarantee

The reason for highlighting the above is to maximise the benefits of the vehicle being bought in the company name and getting capital allowances (corporation tax relief on cost) that reduce the corporation tax bill.

If the above options are not viable and you buy the vehicle personally, then the options you will have will be:

Claim business mileage like you were doing on the old car and take withdrawals for this to reimburse the cost of the lease
Transfer the lease into the company name when possible to do so. However, there is no guarantee how long this would take and whether the lease provider would agree to this.

As you are a Crunch Pro subscriber, don’t forget that you have unlimited support from your Client Success Manager and Accountants. I would recommend getting in touch with us directly for advice on in depth subjects like this.

All the best,
Katie

Arnosbaum

That sounds like a sensible breakdown, especially the point about waiting until year one accounts are complete before trying company finance again. I would also check the exact tax and lease implications of buying personally first fnf, because moving it into the company later is not always straightforward.

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