Vehicle leasing could be an attractive option for financing your business fleet
Figuring out the most tax advantageous way of financing your business fleet can be tricky.
There are a range of options and a range of issues related the type of business you are running. In the first of a short series on financing your business fleet, Lewis Smith & Co. looks at the advantages of taking the vehicle leasing approach.
One of the key attractions of leasing is that provided the CO2 emissions of the car do not exceed 160 g/km then the whole of the leasing payments are tax deductible…for a time. Unfortunately the qualifying level is being sharply reduced to 130 g/km from April this year (2013), which could impact heavily on your decision making.
If the CO2 emissions of your chosen vehicle exceed 130 g/km then tax relief is only available on a fixed 85% of the lease rentals. Although it is disappointing not to be able to get full relief on all vehicles you might consider that this is quite generous, particularly if the vehicle has high CO2 emissions in the first place.
There are some specific tax points to take into account:
- Sole traders will need to pro-rata down the allowable amount for the business element of their mileage.
- VAT registered businesses can claim the full amount of the VAT of each lease payment but only if the vehicle is being used for business only, or 50% of the VAT if there is some private element of business mileage.
- Company directors will need to declare a leased car as a benefit in kind. They will need to calculate the corporation tax saved on the lease costs against personal tax and employers NI.
Of course your financing choice needs to take in other factors. Leasing means that you avoid the expense and hassle of selling vehicles, and the chances are you won’t keep them so long which could save on servicing and maintenance costs. From an HR perspective leasing may be one way to offer higher quality vehicles to your team than you could afford to buy outright.
Lewis Smith & Co. can help you make your vehicle financing decisions. Call us to today on 01384 235549 for more information or email us at firstname.lastname@example.org.
Lewis Smith & Co. – Are you RTI ready? Our payroll bureau and services could help.