Tax Help - HP deal or lease for car


I have been given a task to do by my FD to work out if it would be cheaper (from a tax perspective) to get a company car on HP or lease it. My tax knowledge is practically non existent and I could really do with the help. My FD knows that I have basic tax knowledge so probably isn’t expecting much but it would be great if I could go back to him with an answer supported by figures.

These are the details I have been given:

• The figures are for a lady who we believe owns a limited company.
• She probably pays tax at 40%
• The vehicle is valued at £25,000 and is two years old if bought on HP.
• If not bought, the lease is £316 plus VAT per month over 3 years.
• If on HP, she would want to sell after 3 years.
• The vehicle has CO2 emissions of 231 g/km
• She will probably do 10,000 miles per year business use.
• Depreciation will be 20% straight line

Any help would be appreciated.




  • sloshed
    sloshed Registered Posts: 100 ? ? ?

    Some information which may be useful for you.

    The company car benefit will be 34% on the list price unless Diesel when the 3% surcharge will apply and it will 35% (the maximum)

    Know for what I remember whether the car is purchased or leased, when it is in the company the company car benefit will apply.

    An alternative would be for the person to purchase the car privately and charge the mileage @ 40p per mile (tax free to the company)

    Hope this helps and good luck
  • Stan Bown
    Stan Bown Registered Posts: 39 Regular contributor ⭐ ? ⭐
    From a VAT point of view - assuming your client is VAT registered - they would be able to claim 50% of the VAT on the lease charges but no input tax on the purchase of a car. 100% reclaim on lease charges and input tax reclaim on a car purchase is possible but only within very specific circumstances. VAT Notice 700/64 has the detail.
  • sloshed
    sloshed Registered Posts: 100 ? ? ?
    Hi Don

    Alternatively you could do this another way and use the company car planner on the IRIS website which you can download a demo version. Which it appears do all this for you!
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