UK Benefits of Purchasing a Car Through Your Business

Purchasing a vehicle for your company is similar to purchasing one for yourself. However, consider several things when purchasing a vehicle in your company’s name.

You will encounter many requirements while purchasing a vehicle through your company. From finance to taxation, there are different rules to follow at each stage.

Businesses might use some of the tax benefits that come with buying a car through your company. You can take advantage of these tax benefits, especially if you have staff members who frequently need to drive. To learn about the advantages and specifics of purchasing a car through your company, read more.

Steps to Purchase a Car Through Your Business

Requisites for Business Car Financing

When applying for business vehicle finance, the first step you must take is to check your personal and corporate credit ratings. This is done so that lenders can simultaneously assess your risk profile and loan repayment capacity.

One of the requirements for business car finance is that you permit the bank to check your credit history, so it is essential to be prepared beforehand. You will be able to address any inaccuracies and compensate for unpaid payments.

Documents Required

The appropriate papers must be acquired to satisfy your lender’s financial requirements. Among the documents are some of the following:

A copy of any partners’ or shareholders’ identification documents, the business’s registration and VAT number, if required.

  • a complete list of contact details, including the corporate address;
  • Details on the trustees, members, and director;
  • The balance sheet and banking information for the company; (if applicable)
  • Specifics about the vehicle you want to finance.

Before filing your application to the lender, if you’re doing it online, you must complete the proper documents and scan and upload the necessary documentation.

Check Your Business Credit Score When Purchasing a Car

Before going to a dealership, you should get your company’s credit score. The business credit scores range from 0 to 100. You should qualify for loans if your credit score exceeds 80. If your business’s credit is bad, leasing a car rather than buying one can be a better option.

Find The Right Dealership

Examine the many dealerships in your area to find one that provides financing and offers vehicles to businesses. Many businesses may provide special programmes and even fleet savings if you purchase many vehicles. The most popular lenders include:

  • Banks where you have business accounts. Verify if they offer lower prices to businesses that have accounts with them.
  • Online lenders specialising in auto loans for commercial purposes.
  • A larger dealership with a finance department.

 Register the Car

You must register a car with the DVLA after buying it. You could have to submit various paperwork and shell for different fees to get a business car, depending on your home state. It would be helpful if you were prepared to provide evidence of insurance, regardless of where you live.

Understanding the Tax Benefits Implications

If you want to use the automobile for business and personal travel, you can benefit from purchasing it through your company. The following are the advantages of purchasing a car via your business and from different methods.

Loan/Hire Purchase

Under loan or hire purchase agreements, tax relief can occur if the running costs of the vehicle, such as insurance, repairs and fuel, are paid off by the business and are deductible in tax calculating profit.

Additionally, capital allowances can be claimed. These are a type of depreciation that is tax approved and the deduction rate can depreciate anywhere between 6% to 100%, depending on certain factors, such as the make of the car (i.e.: brand new or previously used), and its carbon emissions.

Limited companies can use cars for private reasons and gain tax benefits via a benefit in kind (BIK). The government is striving towards encouraging entrepreneurs to buy electric cars by providing tax relief incentives for the initial car purchase price and low BIK rates.

Personal Purchase/Lease

If you followed this option, they’d be liable for the running costs of the vehicle, but they would then be eligible for business mileage to be claimed back. For cars, people can claim 45p per the first 10,000 business miles in the tax year and then 25p over that mile amount.

These rates are HRMC-approved, and the company can then claim any tax relief on reimbursed amounts. If the company had paid you over those rates, as mentioned above, then any excess would be a BIK.

 

 

Rylie Holt