Using a Vehicle For Business – Pt 1
BIK (Benefit In Kind) on company car – Let’s assume Mr. Jones operates through a Ltd. Co. – he buys a 2006 Mercedes S-Class for €10k through the Ltd. Co. Mr. Jones recalls hearing about BIK on a company car but thinks – ‘’it only cost €10k – how bad can the BIK be? The accountant can deal with that at the end of the year!’’
Unfortunately BIK can be very harsh as it is based on the Original Market Value of the car – not the amount you pay for it! In this case the S-Class had an OMV of €135k and the BIK is 30% = €40K – this will result in a €20K annual tax bill on a car that 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).
This series 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 e-mail firstname.lastname@example.org. Article 2 will be posted tomorrow.