Hi Free Bird,
Very interesting idea, I too have contemplated this as an option for if my car will not see the IVA through, and/or if I receive a significant income increase (to minimise any increased 'profit' and therefore keep my IVA repayment as low as possible).
Could be quite affordable as well, I have seen things like Ford Fiesta's for around the £100 + VAT mark pcm. Some 'Super-Mini's/City Cars, even less.
My first thoughts are that, assuming the your company is 'credit worthy', then technically you will be allowed to do this without the need to trouble your IVA firm.
As you say: Your Ltd. Company is a separate Legal Entity to you as a person, even if the reality is that 'you' are financially in control either way.
However, take heed of Andy's advice if you have to offer some sort of 'personal guarantee'.
Personally, I would avoid 'Moneybarn' at this stage: With their high credit-card-like APR's, you will be repaying the same amount each Month for a 5-Year old car, vs leasing a new motor through the company for the same outlay.
Question for an IP: Surely the OP will need to seek permission from their IP anyway?: The 'Benefit in Kind' will show up on the personal tax return, so if like me they have to submit their latest books at review time, the IP will see it. Could this then constitute a breach of the IVA (ie: by clearly having taken out extra credit?
On the plus-side, assuming that this would not breach the IVA, I would think that the monthly repayments are written down as operating expenses, so you won't effectively be taxed on them, which will off-set the taxable BIK value to some extent.
If you are VAT registered, you will only be able to reclaim 50% of that back (against your Monthly repayments), due to HMRC assuming that you will use the vehicle for personal use as well as business (the 50% rule may apply to your net monthly repayments as well - check with your accountant).
Not sure if you can continue to reclaim 45p per business mile (I assume you do at the moment?), or if you just have to reclaim VAT against fuel/servicing bills etc (all of it against these items I understand), with corporation tax relief against the net amount.
Also check the lease terms for things like the expected condition of the car when you hand it back. I have heard that some firms expect all the tyres to be the original premium brand with 6-7mm of tread left (ie: like new almost). Check for excess mileage penalties or unreasonable wear 'n' tear conditions as well.
Would be very interested to know how you get on if you pursue this course of action.
Good luck.
Last edited by
UpToMyNeckInIt on Thu Feb 13, 2014 9:21 pm, edited 1 time in total.
My opinions are just that: Based on my experience and being a self-employed IVA customer.
