Transferring personal car to business

kellyp

What is the best way to transfer a personal car to a new business (sole trader)?
Do I simply find out the market value and work out a percentage of personal / business use and apply that to the market value and costs since the business started? there is no business bank account yet so would funds physically need to be transferred at some point? thank you in advance

AndrewLeyland

There a couple of questions i would have before giving a answer.
Is the car on fiance?
Is the business going to be paying the expenses of the car?
Is the business got turn over for year looking like it be over 1.35 million?
are they planning to always to be a sole trader or looking to form a limited company?
The big thing here is a sole trader doesn't have a separate legal identity to being the owner of their company, and there is no legal distinction between their personal assets and those of the company.
but currently with not need to worry about paying Corporation tax to HMRC there no need to produce a full set of accounts.
Right now it be hard to distinguish this asset since i am assuming it existed before the business existed and the sole trader currently is sharing there personal bank account with the business.
also as a additional none fiance matter have they made sure they got business car insurance since if they haven't it could invalidate there insurance if something happened

kellyp

Hi, the car isn't on finance. The business would pay a percentage of the expenses. turnover not over £1.35m. Planning to remain a sole trader. Yes a personal bank account is being used for the business.

AndrewLeyland

Since his Assets can be used as the business assets there be no need to transfer the car to the business you just need appropriate the expenses to what business use and what personally use. It be worth looking over level 4 book on Business Tax.

douglasstroud

Cash basis or accrual accounting?
Would it not be more beneficial to charge the mileage?

kellyp

AndrewLeyland said:

Since his Assets can be used as the business assets there be no need to transfer the car to the business you just need appropriate the expenses to what business use and what personally use. It be worth looking over level 4 book on Business Tax.

Thanks for the reply. The reason for my question is because my client wants to decrease his taxable income so would like the business to 'buy the car' as it is used mostly for business. So if the car is worth e.g. £10,000 and is used 80% for business, can we use the £8,000 as a capital allowance? and then obviously the 80% of running costs as expenses...

kellyp

douglasstroud said:

Cash basis or accrual accounting?
Would it not be more beneficial to charge the mileage?

He is currently claiming mileage

douglasstroud

If your client has already claimed mileage on the car then they have to stick with that until they change vehicle, so mileage, running costs, repairs and cost of car all included in the 45p/25p rates.
Even if they had not claimed mileage they still could not do what you propose for a used car, the car would go into a pool depending on the CO2 emissions and then you can claim either 18% or 6% of the MV annually with this diminishing each year. (MV allowing for personal use obviously)

Neillaw

You would need to do the maths on this as regards doing the mileage claim or the 80% business costs to see which one would benefit your client. You would also need to take into account any balancing charges relating to the capital allowances. If your client is only going to keep this car for a short time then this may be a big factor.