Thinking of changing the car or van in 2017?
Do you use your car (or van) for business?
Do you understand the tax implications?
Most business owners will use a vehicle in the course of running their business, at least to some degree. From a tax point of view this is an opportunity to get things very right or very wrong and it is good to understand this BEFORE buying a new vehicle. We are going to run a series of 6 articles over the next 6 days outlining some of the issues that you as a business owner should be aware of in this regard. If you are thinking of changing your vehicle in the New Year you should talk to us first so you understand the tax implications. The type of vehicle you drive, how you choose to finance the purchase of that vehicle and whether you operate as a sole trader or a Limited Company can all have significant tax implications when it comes to using a vehicle for business.
This serious of articles are for illustrative purposes only and do not constitute professional advice. To make an appointment to discuss any of the issues raised in these articles and the services we provide please contact us.
BIK (Benefit In Kind) on company vehicle – Let us assume that Mr. Jones operates his business through a Ltd. Co. – Jones Ltd. – he buys himself a lovely 2005 Mercedes S-Class for €10k through the Ltd. Co.
In the back of his mind Mr. Jones recalls hearing something about having to pay BIK on a company vehicle but he has always fancied driving around in a Mercedes S-Class and says to himself – ‘’it only cost €10k – how bad can the BIK be? The accountant can deal with that at the end of the year!’’
Unfortunately for Mr. Jones BIK can be very painful indeed as it is based on the OMV (original market value) of the vehicle when new – not the amount you pay for it! In this example Mr. Jones’s Mercedes S-Class likely had an OMV in the region of €100k and the BIK is likely to be 30% of OMV = €30K – this is added on to his salary as extra gross pay and will result in a €15K annual tax bill on a car that only cost €10k!
Obviously this is an example of how to get it very wrong. Mr. Jones should have spoken to us first! Tomorrow we will publish an example of how to get it very right! (By the way – watch out for article 6 where we will return to Mr. Jones and show how he could have got his Mercedes S-Class in a much more tax efficient way).