Using your car or van for business part two

Welcome to article 2 in our series of 6 articles in relation to the tax implications of using a vehicle for business purposes.  Please see article 1 here.

Yesterday, in article 1, we introduced you to the rather unfortunate Mr. Jones who made the mistake of not talking to us BEFORE buying a nice 05 Mercedes S-Class for €10k through his Limited company and how the BIK on that resulted in an annual tax bill of €15k!

In today’s article we would like to introduce Mr. Murphy.  Assume that Mr. Murphy is a sole trader and uses his car 100% for business – his wife also has a car which is used for the family and all personal travel.  Mr. Murphy wants to change his car in the New Year and contacts us before doing so – a very good step if he wants to be tax efficient!  We ask Mr. Murphy what type of car he likes and he says that he has always wanted a BMW 5 Series.

We advise Mr. Murphy to go for a post July ’08 2l diesel model as it is a low emissions vehicle – he buys a 2008 BMW 5-Series 2l diesel engine for €10k – because this is a low emission vehicle it has a deemed cost of €24k for Income Tax purposes (regardless of how much Mr. Murphy actually pays for it) – this means he will save €12k tax over next few years – not only does he effectively get the car for free – he will actually make €2k on the deal!

This is an example of how to get it very right and shows the benefit for Mr. Murphy of ringing us BEFORE he changed his car.  In tomorrow’s article we will tell you how Mr. Murphy could choose to buy a €44K luxury SUV for only €18k!