TMC is an independent, primarily volunteer organization that relies on ad revenue to cover its operating costs. Please consider whitelisting TMC on your ad blocker or making a Paypal contribution here: paypal.me/SupportTMC

Benefit in Kind tax and Purchasing Options

Discussion in 'The UK and Ireland' started by WannabeOwner, Nov 28, 2015.

  1. WannabeOwner

    WannabeOwner Member

    Joined:
    Nov 2, 2015
    Messages:
    724
    Location:
    United Kingdom
    For a company car purchase does it make more sense to buy options later, rather than initially? I reckon that the only retro-fit ones are Ludicrous mode [that I don't want, unless/until it improves], Autopilot, Winter Tyres and pre-paid servicing pack

    For a summer delivery I might delay Winter Tyres until autumn anyway ... and maybe I only want rims, and thus perhaps not Tesla ones, so I can choose the best rubber (and find cheapest source).

    Servicing Pack is available for 30 days post-delivery at no extra cost.

    So that just leaves Autopilot ... GBP 2,100 at time of order, GBP 2,500 as a retro-install.

    Is the BIK saving on a couple of thousand worth worrying about? particularly if its going to cost the business several hundred more to buy later (I suppose there is the 20% VAT to consider, too). 100% 1st year writeoff, either way, although I suppose on sale the value is added back (if that is the right term) against the initial 1st year write off, and thus any cash-spend on optional extras bought later might alter that impact? (assuming they are worth Squat at resale time!)

    Just wanting to look for the most cost effective way of making a company car purchase.

    (In case it makes any difference situation is: owner-manager, 50 miles commute (each way) so say 20,000 private miles and 5,000 business miles p.a.)
     
  2. arg

    arg Member

    Joined:
    Aug 22, 2012
    Messages:
    741
    Location:
    Cambridge, UK
    No, because (assuming you are playing by the rules) installing accessories later doesn't save anything (you are supposed to add them to the value).

    See 480: Expenses and benefits - a tax guide - Publications - GOV.UK (para 12.8 on page 40 of the PDF).

    Where there is a bit of wiggle room is in deciding what is or is not an accessory, and which ones you might want to own personally.

    I think it's pretty clear that Servicing Pack is not an accessory, so shouldn't be included in the P11D value regardless of when you buy it. Servicing, repairs and consumables are very clearly allowed to be paid by the business without affecting the BIK.

    Winter wheels are an interesting question - my reading of the rules is that if the employer provides them, and only provides you with one set of wheels at a time (ie. you don't keep the winter wheels at home during the summer), that's just exchanging parts of equivalent value and so no extra charge. But just my opinion, I haven't argued that one with HMRC!

    Charging accessories are another grey area. You might argue that things like CHAdeMO adapter, type2 cable, UMC etc. are not "attached to the car" and hence not accessories, but it's not clear-cut.

    For some things, buying it personally may make sense - the whole advantage of getting the company to own the car and pay BIK rather than income tax on the payments to own the car personally is that (over the long run) you escape tax on the depreciation and maintenance - not on the residual capital value of the car. For the car itself, it's going to depreciate dramatically and it's a big win. For an accessory that isn't going to depreciate much (and you can't get out of treating it as a "qualifying accessory"), you might be better off to just buy it personally.
     
  3. WannabeOwner

    WannabeOwner Member

    Joined:
    Nov 2, 2015
    Messages:
    724
    Location:
    United Kingdom
    Interesting points raised, thanks.

    That would be interesting then ... I clearly won't use the wheels / tyres during the Summer (hard to use two sets at once! ... and of course they would wear very quickly at Summer temperatures) but there is no space to store them at work, so the only option would be to store them at home :confused:
     
  4. arg

    arg Member

    Joined:
    Aug 22, 2012
    Messages:
    741
    Location:
    Cambridge, UK
    Well, that's just me being pedantic - if the other set aren't available to you then there's no argument, it's a "replacement accessory" that is "not superior" and no extra chargeable value.

    Probably you could argue that keeping them at home is irrelevant, but that's an argument rather than cast-iron in the rules. You'd think this was something that comes up often (it's the second time I've discussed it on Tesla forums), but I've not seen the answer posted elsewhere.
     
  5. WannabeOwner

    WannabeOwner Member

    Joined:
    Nov 2, 2015
    Messages:
    724
    Location:
    United Kingdom
    Helpful to know the letter and intent of the law, thanks, but I can't see HMRC coming after the added-value of a software-upgrade (what's the difference between a bug-fix and an improvement to TACC ... or addition of Auto Bay/Garage Parking ... or purchase of Auto Pilot) unless/until? motor manufacturers use that as a device to get around BIK / VAT etc.
     
  6. smac

    smac Active Member

    Joined:
    Aug 4, 2013
    Messages:
    1,121
    Location:
    Nottinghamshire
    It's arguable as some other cars are equally software limited. e.g. those where simple ECU changes turn a "1.8" into a "2.0", or add sat nav, or... Buying upfront would incur BIK penalties, and IF you play by the rules (as arj says) subsequent upgrades _strictly_ should incur uplifts in the taxable benefit irrespective of purchase sequence.

    Saying that a wise accountant once told me to leave something obscure in the books. Too squeaky clean and on a random spot check the inspector will stay until in your office until they find something... So leave something borderline which is believably open to easy mis-interpretation. They discover this make you settle the tax payments, and are off and out of your hair with a "win", and everyone's happy.

    (It's no fun having 2 HMRC guys using up valuable meeting space and constantly pestering your accounts team to fetch files. So even when you are 100% above board it's a PITA!!!)
     

Share This Page