help with LTD company and corporation tax

[Blenheim Car Sales 111]

Its my  first year of trading as a LTD company after 5 years of being  Sole Trader, Just come of phone with accountant asking 2  questions and wondered if you kind people could help with my issues see if i understand it right.To do with Corporation TAX

 

1

I currently run my own personal car nothing to do with company V5 in my name owned it 8 yrs all legit, I know as a  LTD company i will pay 19% corporation tax on my LTD company profits, I had a cunning plan to have my LTD company formally purchase my own personal car and take it as stock, There again all legit it comes out of use and goes up for sale, My thought process was to pay myself £4000 (realistic trade value) from company funds thus reducing my profits and releasing £4000 legally tax free ???, My accountant has said that i can do that but ALL my cars stock is classed as profit and my cars stock value will be treated as profit and taxed at 19% for corporation tax ???, Is he right ?? how can they charge me a profit tax on a car that is not yet sold ??? stock unsold is future profit ???

 

2

This year i have done 10000 miles for business all logged and documented, This means i can claim £0.45p every business mile i have done meaning its £4500, Because i choose to pay myself a very low salary my personal tax is going to be around £1000 or so, I know that all directors have to complete self assessment and of course this i think the Business mileage declaration is in there somewhere for completion, My question is if i am owed £3500 how does this get paid ?? is it a tax code adjustment or is it paid direct from the company funds ???

[Lucas 9]

You should find another accountant if you have doubt in your existing one.

Edited December 24, 2018 by Lucas

[Stalker 180]

1. So when your accountant does their calculations for assets etc, your stock will be valued at its stand in value.

If you add your own car to the stock, it will add to the value of your stock.

 

2. It would be directly form company funds, however every journey you claim for must be logged correctly.

 

ps. Its not against the law to ask your accountant to explain something in plain English

[mike101 8]

Sounds a bit confused to me.

Your stock is a current asset and sits on your balance sheet normally valued at what you paid for it.

You can either take the money for the fuel out if funds allow or let it sit in your Directors Loan Account. You can then choose to take this out or if it works out to be tax efficient for you, you can charge the company interest for using it. 

[Blenheim Car Sales 111]

Yes confusing, I had good understanding of Sole trader workings just new to me as LTD company, Just wanted to see if he was talking rubbish or he was correct because sounded a bit strange to me what he was suggesting

 

thank you

[ExCouncilJobsworth 27]

4 minutes ago, Blenheim Car Sales said:

Yes confusing, I had good understanding of Sole trader workings just new to me as LTD company, Just wanted to see if he was talking rubbish or he was correct because sounded a bit strange to me what he was suggesting

 

thank you

You can always ring up another one for a second opinion

[Mark101 536]

Stock cars form part of your balance sheet (and profit).

For example, let’s say you earned £100k profit in the last 12 months, you cannot simply buy 10 x 10k cars to “wipe the profit out.”

Your stock will be valued each year and form part of your total assets.

So whether you keep the £100k in the bank or £10k in the bank and 9 x £10k cars - you will be taxed the same way.

 

[Blenheim Car Sales 111]

4 minutes ago, Mark101 said:

For example, let’s say you earned £100k profit in the last 12 months, you cannot simply buy 10 x 10k cars to “wipe the profit out.”

 

Buggar.........................   thats what i thought i could do, I should have known its not as easy as that

 

thank you

[trade vet 704]

If you are doing 10k business miles ( probably 14000 in total )  in your personal car and charging the company accordingly why would you want to sell the car to the company.You are still going to need to buy another car to keep that up.I would think HMRC would also want to see from your personal bank statements that you had not only bought fuel but had also paid for insurance, road tax,servicing and other maintenance costs out of your personal bank account.You can’t hoodwink these guys and you will find that even if you make a mistake they will not buy it.

[justina3 518]

There is no such thing as a cunning plan, there are only ways to mitigate a tax bill slightly within the rules. 

[Blenheim Car Sales 111]

TRADE VET

Was on a sunbed in canaries earlier in month it came to me on a sunbed high on beer, Seemed  plausible, I have all invoices for  repairs servicing  road tax ect from my own personal account, it would stand scrutiny by IR, only reason why i wanted  to transfer it was because i thought it was a tax loss and i am getting a super cheap lease deal on a  new car so 2 personal cars in use does not make sense

[trade vet 704]

7 minutes ago, Blenheim Car Sales said:

TRADE VET

Was on a sunbed in canaries earlier in month it came to me on a sunbed high on beer, Seemed  plausible, I have all invoices for  repairs servicing  road tax ect from my own personal account, it would stand scrutiny by IR, only reason why i wanted  to transfer it was because i thought it was a tax loss and i am getting a super cheap lease deal on a  new car so 2 personal cars in use does not make sense

I see,so your new car is personal or PCP lease.

[Blenheim Car Sales 111]

My new car is Personal Contract Hire, All in personal name, Again i was planning on doing similar, this car will be £200 a month and plan on submitting £4500 of personal costs to again offset  at the £0.45p mark so its close to being a free car ( pay some out claim most or more back)

[trade vet 704]

2 hours ago, Blenheim Car Sales said:

My new car is Personal Contract Hire, All in personal name, Again i was planning on doing similar, this car will be £200 a month and plan on submitting £4500 of personal costs to again offset  at the £0.45p mark so its close to being a free car ( pay some out claim most or more back)

Sounds good.I know a guy who is a subcontract buyer.He travels 800 miles a week in his personal car to auctions all over the place and charges a mileage allowance.Of course when I was doing that my accountant never told me about it.

[Stephen 21]

Best bet is to accrual for something that may or may not happen 

so if you have a unit that’s going to need painting accrual £200 a month, if you may need to do electrial work New lights switches acrual for it £200 a month

or if shutters need replacing etc don’t go daft with it but if you have a unit you can safely do some 

[justina3 518]

14 hours ago, Blenheim Car Sales said:

My new car is Personal Contract Hire, All in personal name, Again i was planning on doing similar, this car will be £200 a month and plan on submitting £4500 of personal costs to again offset  at the £0.45p mark so its close to being a free car ( pay some out claim most or more back)

So where does the £200 a month come from salary ? If So you pay paye on it if it’s drawn as a wage plus the company pays a contribution to paye system. 

When we run the maths it worked out cheaper to lease a car classed as a pool car through the company. The key word is pool there. 

 

[trade vet 704]

On 25/12/2018 at 6:58 AM, justina3 said:

So where does the £200 a month come from salary ? If So you pay paye on it if it’s drawn as a wage plus the company pays a contribution to paye system. 

When we run the maths it worked out cheaper to lease a car classed as a pool car through the company. The key word is pool there. 

 

Pool car./pooled car........I don’t think so.It must be availible to all employees and left on the business premises overnight.Technically every journey must be logged.I think it would be easy for HMRC to catch you out and then they go back years.A similar thing happened to us and we got a big bill from HMRC.

[justina3 518]

45 minutes ago, trade vet said:

Pool car./pooled car........I don’t think so.It must be availible to all employees and left on the business premises overnight.Technically every journey must be logged.I think it would be easy for HMRC to catch you out and then they go back years.A similar thing happened to us and we got a big bill from HMRC.

We run two pool vehicles a car and a van the log is easy to keep on your phone, doesn’t have to be left on premises as long as the home mileage is excluded from your logs. Guess it works for some and not others. 

 

[trade vet 704]

2 hours ago, justina3 said:

We run two pool vehicles a car and a van the log is easy to keep on your phone, doesn’t have to be left on premises as long as the home mileage is excluded from your logs. Guess it works for some and not others. 

 

Good luck with that Justin.Travelling to and from work is private use.Its all about the ‘availability’ of private use......they  could do you ..plus interest ,plus a penalty based on the degree of negligence or culpability I think they call it.

[Mark101 536]

You simply say that home is your base (if you do any work at home, admin or otherwise). Then travel to your trading premises is business mileage.

[justina3 518]

1 hour ago, Mark101 said:

You simply say that home is your base (if you do any work at home, admin or otherwise). Then travel to your trading premises is business mileage.

There is no need to get creative just show them the logs we use a form similar to the one hmrc use to calculate wrong declarations. 

Its very easy your work to home is 10 miles you do hundred miles in a day you just exclude 10 miles of your chart. 

Above all remain consistent. 

[trade vet 704]

1 hour ago, Mark101 said:

You simply say that home is your base (if you do any work at home, admin or otherwise). Then travel to your trading premises is business mileage.

Hi Mark

Thats what I thought,this story is true.Our regd office is our house and we do have an office.At the time it was a busy office,faxing finance docs and invoices,paying for stock,faxing CHAPS transfers,anything financial.The car which was driven by my wife did small mileage which was all business use and ( knowing HMRC) we made sure it was never used after 5.HMRC wanted to know about typical daily journeys and said there must be a time when private use occurs.I made the big mistake of telling them that on a Wednesday my wife would collect her elderly mother who lives 200 yards from us and drop her at the post office to collect her pension.She would then carry on to do the banking using the normal route.On the way back she would collect her mother etc.So the route to the bank never changed......The result,the nice people at HMRC deemed it private use of a company car,went back 4 or 5 years and we got a large bill.....A while later I was telling a senior HMRC guy I knew about the episode and he found it hilarious.! 

[MotorNet 0]

On 24/12/2018 at 2:58 PM, Mark101 said:

For example, let’s say you earned £100k profit in the last 12 months, you cannot simply buy 10 x 10k cars to “wipe the profit out.”

 

unless of course you are starbucks or amazon and have a huge RND budget you assign them too , then you will owe nothing ;-)