Should I have a company car and what about double-cab pick-ups?

As an accountant, I must get asked at least once a month by different clients, who are planning on buying a vehicle, whether they should own it personally or treat it as a company car. For a director the general response is keep the car out of the company, particularly if it’s expensive. You would be much better off claiming the 45p a mile mileage allowance.

However, the advent of super efficient/low Co2 cars changes the advice particularly if the director or employee doesn’t mind driving a small engine car.

Listed below are some of the better options from a tax point of view:

Volkswagen Golf 1.6 TDI Blue motion – 99 Co2 List price £19,745 Bik of £2,962
BMW 3 series saloon 316d ES – 118 Co2 List price £25,520 BIK of £4,849
Ford Focus 1.6 TDCI Estate – Co2 109 List Price £19,040 BIK £3,237
Totota Yaris 1.0 VVt-I – Co2 111 List Price £12,165 Bik £1,855
Skoda Fabia 1.4 TDI SE – Co2 94 List price 18,330 BIK £2,566.

Where it does get interesting is if a director is prepared to drive a van or a double-cab pick up (DCP). The tax benefit for a van is much lower and if you have a lifestyle that suits the use of a van then this could be a great option.

A vehicle classed as a van for P11D purposes will attract a Bik of £3,150 and fuel benefit of £594 (15/16 figures), including all your fuel! So a basic rate tax payer will only pay £749 of tax.

Some very popular double-cab pick-ups include:

Ford Ranger 2.2 TDCI
Land Rover Defender 2.2 TD4 pickup
Mitsubishi L200 2.5 DCI
Nissan Navara 2.5 DCI
Toyota Hilux 3.0 D4

What makes a van even more interesting is the often overlooked consideration is that provided the business is VAT registered the company can reclaim all the VAT if there is only incidental private use. The VAT is proportionately reduced by your private mileage percentage.

Some of the DCP’s I have seen, particularly the Defender are well equipped and can be real head turners.

I would just add that although HMRC would like to use the VAT rules for determining what should be classed as a van and what isn’t, the reality is that the legislation looks at whether the vehicle is primarily for the carriage of passengers or for goods. If it is both equally (as DCPs are), then it cannot be defined as a car under the legislation, so it is taxed as a van.

As HMRC’s guidance states, the company car test legislation gives them a problem, but they can’t choose some other legislation because it suits their cause. So we have always taken the approach that, unless the vehicle has been constructed primarily for carriage of passengers, it is a van.

I’m hoping this has given you a bit of insight but specific and individual advice is always required.

For further information please contact us today on 01904 464100 or enquiry@garbutt-elliott.co.uk.