Article three, using a car or van for business.
Welcome to article 3 in our series of 6 articles in relation to the tax implications of using a vehicle for business purposes. Please see article 2 here
In yesterday’s article we introduced you to Mr. Murphy and gave an example of how Mr. Murphy could effectively get himself a BMW 5 Series for free, courtesy of the Tax Man. Today Mr. Murphy has informed us that he would actually prefer to drive a luxury 5 seater SUV and was wondering if there was a way he could do this and still be tax efficient!
Once again we will assume that Mr. Murphy is a sole trader – we inform him about the new Ssangyong Rexton W 5 seater business model – although this is a luxury 5 seater 4WD SUV it is officially classed as a commercial vehicle with annual road tax of only €333 – also, as it is a commercial vehicle Mr. Murphy can reclaim circa €8k VAT and write off €36k against income tax – this results in a tax saving of €18k over a number of years – this results in a net cost to Mr. Murphy of only €18k on a vehicle that retails for €44k!
There is one caveat however with this type of vehicle – if you are buying it through a Limited Company beware of BIK (see article 1 in this series)– although this vehicle is a commercial for VAT, VRT and Road Tax it is regarded as a passenger vehicle for BIK purposes and would be liable to 30% BIK – however, in tomorrow’s article we will tell you how to avoid the charge to BIK if the vehicle qualifies as a ‘’pooled vehicle’’.