Buying a car through limited company and then recharging to DLA

Hi

I am looking to get a car through my limited company on HP. I am then looking to mirror the same loan terms to myself so basically I am looking to own the car personally but use the limited company as a contra. The purpose is to own the car myself without having the finance show on my own credit file as this affects the amount you can borrow on a mortgage / remortgage.

I figured that if the business took a loan out for the car and then the director paid the loan through their DLA (including interest), then there would be no BIK as all the fuel would also be paid for by the director.

Is this possible?

Thanks

EW
FMAAT, AAT Licensed Accountant and CIMA finalist

Comments

  • Lewin
    Lewin HorleyFMAAT, AAT Licensed Accountant Posts: 6
    Surely the company would still have to show the asset (as it is secured) and the HP on the balance sheet.

    Also I would assume that where the bank asks, "are there any other regular payment amounts we should know about", then repayments to the company would need to be declared on any mortgage application. You are still repaying a loan, albeit to a company that you own.

    May be slightly different if it an unsecured business loan, probably not worth the risk, though.



  • Neillaw
    Neillaw New Member RossendaleMAAT, AAT Licensed Accountant Posts: 281
    I take it your thinking of raising an invoice for the car and then putting the DR into your DLA causing it to be overdrawn or have it as a loan from the company then I would expect the revenue to take the stance that there is a tax liability on this amount.

    if you took it as a lease then this won't attract any taxable liability as it would be a like for like payment per month which is being reimbursed by yourself. My mentor does this for a number of clients he has and doesn't have any problems.

    Lewin - this may not have an effect on his mortgage if there is enough to cover 12 months payments in his DLA, if there is no cash being transferred he has no disclosure, not sure how the mortgage people treat Dividends as income as they aren't fixed or regular.

  • Enterprise_Warrior
    Enterprise_Warrior Yorkshire & HumberFMAAT, AAT Licensed Accountant Posts: 78
    A lease / hp loan from the business to the director.
    FMAAT, AAT Licensed Accountant and CIMA finalist
  • Neillaw
    Neillaw New Member RossendaleMAAT, AAT Licensed Accountant Posts: 281
    Lease makes it easier as payment would be posted from Bank to DLA which is also off balance sheet. If you wanted to own the car then a Personal contract hire may be an option.
  • Lewin
    Lewin HorleyFMAAT, AAT Licensed Accountant Posts: 6
    The lease payment is irrelevant in some ways. The annual lease cost could be, say, £2k, but the benefit in kind might be £5k. You would need to make good the £5k and not just repay the lease cost, otherwise you will still be left with a taxable benefit. It is still a company car if you are buying it in the company name.

    If the only reason for putting it through the company is to hide the expense (and as a result borrow more) then the bank would probably argue that this is fraud.

  • burg
    burg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,441
    My findings are HP doesn't make much of a difference to what you can borrow. Credit cards have more of an affect. I have very recently applied for a mortgage and our vehicle on HP had very little affect on what we could borrow. They were more concerned about £1500 on a credit card. I've agreed to clear it. So have paid it off today and they are happy to proceed. This was via Santander and can all be done online. Much easier than our process with Natwest a few years ago.
    Regards,

    Burg
  • Enterprise_Warrior
    Enterprise_Warrior Yorkshire & HumberFMAAT, AAT Licensed Accountant Posts: 78
    The aim is for the company to take out the HP finance but the director to eventually own the car without paying any BIK and doing it the most tax efficient way as possible.

    Mortgage lenders make you jump through lots of hoops to accept your income if you are a limited company owner and use your salary and dividends as a multiple. Fortunately I am employed as an accountant for somebody else’s business which works great for the lender but I want to offset my dividends against a car loan and not have the loan show on my personal credit file.

    There is no fraud intended.
    FMAAT, AAT Licensed Accountant and CIMA finalist
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