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Posted Wed, 13 Apr 2022 15:10:23 GMT by Harry2801
We are a VAT registered, UK limited business. We wish to purchase a car for personal use only through the company, which has a low BIK tax. I understand that if the car is purchased outright, 19% is deducted from corporation tax. Does this corporation tax reduction apply also if the car is leased or bought via hire-purchase?
Posted Tue, 10 May 2022 15:24:22 GMT by HMRC Admin 2
Hi,

If the car is purchased by the company for the director's personal use, no tax deduction can be claimed.  Please see HMRC's Capital Allowances Manual, CA0006 in particular which states as follows:

Depreciation of fixed assets charged in the accounts is not allowed as a deduction in computing taxable profits. Capital allowances may be given instead. Plant and machinery allowances (PMAs) give relief at prescribed rates for the depreciation of fixed assets that are plant or machinery.

In order to qualify for PMAs, a person must:
  • be carrying on a qualifying activity CA20010, and
  • incur qualifying expenditure (CAA01/S11).               
Qualifying expenditure is capital expenditure on the provision of plant or machinery CA21000 wholly or partly for the purposes of the qualifying activity (CA20010). Normally the person must own the asset as a result of incurring the expenditure.

Thank you.
Posted Tue, 10 May 2022 15:33:37 GMT by Harry2801
Sorry, I will clarify, it’s a 100% electric car, so I understand Benefit in Kind is 2%. So personal Use only should be fine even if bought from the company? We are a VAT registered, UK limited business. We wish to purchase a car for personal use only through the company, which has a low BIK tax. I understand that if the car is purchased outright, 19% is deducted from corporation tax. Does this corporation tax reduction apply also if the car is leased or bought via hire-purchase?
Posted Thu, 19 May 2022 16:13:50 GMT by HMRC Admin 2
Hi,

We would probably need a few more specifics to answer completely. However, broadly if the car was purchased by the company for use by the company then allowances can be claimed which would reduce the Corporation Tax due,

However, if the company purchase the car and there is absolutely no business use of it at all there would be no reduction. Although the car would become an asset of the company there would be no capital allowances or wda that could be claimed unless there was some business use involved.

Thank you.

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