Research Assesment
Acquire a business car in the UK
Marenly Beltrán Pittí
Buying a vehicle through a limited company is not as hard as you think, it’s very similar to purchase a
vehicle in your normal life. However, managing the expense on your business’ accounts takes some
consideration to file them correctly and control the financial commitment to your company.
Acquisition process
1. Legal requirements:
Taxation rules: When purchasing a vehicle through your company, it is vital to
comprehend the taxation rules and how they may impact your finances. Here are some
key considerations:
- Business expenses: A vehicle purchased for businesspeople is considered a business
expense and can be claimed as such on the tax return. It is important to keep records and
receipts updated to ensure that you are not claiming more than you are entitled to.
- National Insurance Contribution: If you provide a car to an employee for personal use,
you must pay Class 1A national insurance contribution on the car’s value. Generally, this
is calculated on the vehicle’s list price and the CO2 emissions it produces. However, if
you utilize the car exclusively for the company purposes, there may not be any national
insurance contributions to pay.
- Capital allowance: When you purchase a vehicle for business use, you may be able to
claim capital allowance on the cost of the car. This is a tax relief that allows you to deduct
the cost of the car from your company’s profits, reducing the amount of tax you must pay.
However, this amount that you can claim, depends on the CO2 emissions produced by the
car.
- Benefit in kind tax: When a car is provided to an employee for personal use, they may
have to pay benefit in kind tax on the vehicle’s value. This is calculated based on the
car’s list price and the CO2 emissions it causes. It is vital to keep this in mind when
deciding whether to provide a vehicle as a benefit to your employees.
- Fuel Scale of Charge to HMRC: If your business provides fuel for the vehicle, you may
be required to pay a fuel scale charge to HMRC. This is an additional tax on the car based
on its emissions and the amount of fuel provided. It is crucial to keep accurate records of
any fuel provided to ensure that you’re paying the right amount of tax.
2. Financing options for a British company to purchase a car
Three ways you can buy a car through a limited company
- Purchasing the vehicle outright:
You can purchase the car by paying the full price. This can help simplify your accounting if
you’re just beginning, as you won’t have to calculate and expense the interest you would
otherwise pay through a loan.
- Hire purchase agreement:
This purchase method allows you to own the vehicle in-full. However, you pay off the loan used
to purchase it over time. You can still modificate, use or upgrade the car while paying a
manageable amount over time.
- Leasing a vehicle:
You don’t own the car, but you can use it. This method is very low risk because you can upgrade
the vehicle or walk away once the lease term is finished. The lease agreement can be cheaper in
the short term with smaller payments throughout.
3. Documentation required for a UK company to purchase a car
V5C Registration Document:
- Contains details about the vehicle, including make, model, VIN, and registered keeper.
- Registered keeper is responsible for taxing the vehicle.
Proof of Purchase:
- Can be a receipt, finance plan proof, or paperwork from a sale.
MOT Certificate:
- Required after three years to ensure roadworthiness.
- Covers areas like emissions, electronics, brakes, and steering.
Service Log:
- Records service history, including dates and work carried out.
- Helps in understanding any past accidents.
Insurance Policy:
- Shows insurance coverage and duration.
- Some dealers may provide temporary insurance for new owners.
Warranties:
- Important for vehicles under warranty or financing agreements.
- Ensure all parties are aware of agreements before finalizing the sale.
Personal recommendation:
From my point of view, I think that the British companies should analyze in detail all the pros
and cons of this, because it is a delicate thing, then, that they come to the best possible decision,
to buy or not to buy the car. They also must see who they give a car to, they should be qualified
people, that it is an investment and not a loss.
Information sources
- https://countingup.com/resources/how-to-buy-a-vehicle-through-a-limited-company/
- https://www.gaffneyzoppi.com/blog/can-i-buy-a-car-through-my-business-limited-
company-uk-guide
- https://www.tmcmotors.co.uk/news/what-important-vehicle-documents-do-i-need-when-
buying-or-selling-a-used-car
Ways to improve business savviness:
Companies are likely to prosper when people with a understanding of their business environments run
them. This is the reason why they are always looking for employees and managers who demonstrate
what they are looking for. Business savvy is an astounding concept used to describe someone who
makes decisions, such as assess the market in which their industry operates, leverage and reference the
company’s business strategy, and analyze important financial data. Business savvy leaders understand
how to keep the organization on a strategic path. Here are some ways to demonstrate our topic:
- Be a problem solver
- Develop emotional intelligence
- Communication skills
- Build your charisma
- Learn from the competition
- Consider customer feedback
Business and the law to benefit the company:
Building business from scratch requires careful planning, market understanding and a solid financial
foundation. Furthermore, for legal considerations we got:
- Necessary licenses and permits: you must obtain the licenses and permits to operate
legally.
- Insurance requirements: is crucial to protect your business from potential risks and
liabilities, it may vary depending on your location and the type of vehicles you sell.
