This is the most common question people ask whether to buy a car in the name of the limited company or not. Well, most people do this because they are aware of adequate information about the taxation and rules by HMRC. This blog will include all the common mistakes and confusion people face while buying a car under a limited company.


The Car’s Usage

This arises the most important factor in owning a car under a limited company. The usage of the car decides the VAT reclaiming eligibility. You can only reclaim the VAT if the car you are using is only for the business purpose. HMRC requires proof to see the eligibility and decide upon the factors. If you have used the car personally and reclaim the VAT, you will face penalties and also you will have to pay all the missed income tax and National Insurance tax. Various sole trader accountants in London take advantage of the limited rules they have but for a limited company, the rules are different. You cannot use the car even for the purpose of traveling to and from the office.


Level of CO2 Emissions

The next big thing is the CO2 emissions your car produces. You can expect a higher deemed benefit if the emissions are higher. HMRC have the rule to calculate the deemed profit by which you pay tax. This calculation includes the total listing price of the car multiplied by the percentage HMRC has set against the CO2 emission of your car. The ending result will decide if you are eligible to pay the tax on your car or not apart from the online tax return or reclaiming VAT. You can hire accountants to make the calculations for you.


Claiming Capital Allowance against the Car

When you buy a car under your company’s name, it becomes an asset that is not a part of the capital allowance. So, you cannot claim for this asset. In the case of a car, the deductions in the tax depend upon the resulting ratio after the benefit calculation against the CO2 emission of the car. You can carry the calculations with the help of London accountants or just look at the following.


95g/km CO2 = 100% return

96g/km to 130g/km = 18% per year

Above 139g/km = 8% per year

Tax on the Fuel

The fuel also makes you pay the extra taxes if the rules by HMRC are not taking into account properly. If the fuel is used for the company only, there will be no extra tax to be paid. But if the fuel is used personally from the company, the total amount after the emission calculation will be multiplied by a fixed amount set by HMRC no matter how much fuel has been used. And according to some fixed fee accountants London, you can reclaim the Vat on the fuel as well if the fuel is used only for the company.


Other Rules


There are some other minor rules that should be taken into knowledge. Many accountants for small businesses follow the rules for their employers just to make sure the company doesn’t face the legal issue by HMRC.