Stratford-upon-Avon
13 The Courtyard
Timothy's Bridge Road
Stratford-Upon-Avon
Warwickshire CV37 9NP
Employer company car considerations
If you are thinking about purchasing a company car through a limited company, there are many issues that need to be considered. In this short article we will point out some of the main issues to be aware of, but it is important to properly research this area and weigh up all the available options.
The tax treatment of the purchase will depend on how the purchase of the company car is financed.
The purchase of a company car will be classed as a fixed asset and tax relief will be obtained by way of capital allowances. The amount of capital allowances that can be claimed will fall within one of the following 3 categories:
- 100% First Year Allowance. New and unused electric or zero emission cars emission cars benefit from 100% capital allowances. This means that 100% of the cost of the car can be deducted in the first year.
- 18% of the car’s value (main rate allowances). This effectively means that 18% of the purchase price can be deducted from your profits each year before you pay tax.
- 6% of the car’s value (special rate allowances). This effectively means that 6% of the purchase price can be deducted from your profits each year before you pay tax.
It is clearly demonstrated from the percentages above that the government is encouraging employers to choose more fuel-efficient vehicles by offering a tax incentive.
The company will also be liable to pay Class 1A NICs in respect of the provision of a company car based on the car benefit charges. Employers currently pay Class 1A NICs at the rate of 13.8%. This is increasing to 15.05% from 2022-23. There will be additional Class 1A NICs due where the company pays for private use of fuel.
The employee benefitting from the use of a company car will also face additional tax costs from the use of their company car. This depends on the rate of tax they pay, the value of the car and its C02 emissions.
Grenfell James Technology Adoption Index
How does your business perform against others adopting financial tech? Find out with our interactive diagnostic:
1.
How does your business receive invoices?
A)
Invoices are mainly received in paper form
B)
Invoices are mainly received by email
C)
Invoices are emailed then automatically forwarded to a designated mailbox
2.
How are purchase invoices processed?
A)
Invoices are entered manually
B)
Invoices are attached to manually raised invoices
C)
Automated software (e.g. ReceiptBank, 1Tap, HubDoc etc) collates invoices
3.
How are accounts processed?
A)
Using Excel/paper-based
B)
Using Computer-based, offline software
C)
Using cloud-based accountancy software
4.
How often is business data revised?
A)
Data is updated annually
B)
Data is updated quarterly
C)
Data is updated monthly or more often
5.
How is banking updated for your business?
A)
Banking is updated manually
B)
Banking is updated by imports
C)
Banking is updated via a live feed
6.
How are bank payments made?
A)
Bank payments are manual
B)
Bank payments are made using bulk imports
C)
Bank payments are made directly via accounting software
7.
How are bank receipts reconciled?
A)
Receipts are chased and reconciled manually
B)
Receipts are chased and reconciled automatically
C)
A third-party platform is used to chase debts and collect fees
8.
How often are management reports produced?
A)
No reports are provided
B)
Reports are provided but often too late to be valuable
C)
Reports are automated with real-time information
Score 8-12:
Curious Exploration
Your financial technology phase is Curious Exploration
% of respondent businesses are in this phase too.
Switching accountancy systems may seem like an upheaval, but can be much more straightforward than most businesses imagine. From talking to our clients, they have found moving from paper invoicing and desktop-based accounting software to the cloud and apps quickly makes the transition process a worthwhile investment of time. Digital accounting solutions bring in streamlined processes, up-to-date business data and greater confidence in the accuracy of information when making financial decisions.
Grenfell James works with your team to fully assess the needs of your business and minimise the impact of any transitions for solutions we recommend.
Score 13-19:
Measured Discovery
Your financial technology phase is Measured Discovery
% of respondent businesses are in this phase too.
Once cloud accountancy software is in place, there’s still plenty of scope to improve your accountancy processes and make sure your business is maximising the benefits of adopting a digital accounting solution. Grenfell James assesses each business to understand how any implemented solutions are being used, identify areas for improvement and the needs of the business overall to support your business goals and achieve success.
Our team of experts can discuss a range of time-saving automation and get different apps and cloud-based solutions talking to create and manage a digital accountancy eco-system to help your business grow.
Score 20-24:
Bold Innovation
Your financial technology phase is Bold Innovation
% of respondent businesses are in this phase too.
You know the benefits of accounting technology and the impact it can have on your business goals. If you want to take it a step further, our team can conduct a systematic review of your processes, apps and business goals to ensure your digital accountancy ecosystem is keeping pace with the changing needs of a growing business.