Buying a vehicle through a company or not

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Susie2017

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A friend is considering buying a crew cab type vehicle through his company. He would use it during the course of his business activities carrying equipment etc. He is only a company director recently and is not yet fully au fait with tax rules. He heard that buying this type of vehicle might be advantageous in terms of BIK. Are there other advantages re VRT. He would be buying something second hand probably 5 or 6 years old. He bought a second hand saloon last year using a company cheque. It cost him around 20k. Now his accountant says BIK of 4 k is due. Is he better to sell the saloon and buy a crew cab. Any thoughts ? I
 
If it’s commercial he can sign a declaration with the guards the it is 100% used for work and that’s the end of the BIK. If they have use of it outside of normal work they can pay a reduced BIK. Rather than end up on the wrong side of an audit you can also accept you have private use of a company van and pay BIK at 5% of the original market value which should be way less than the BIK on a saloon. I can’t add the link but revenue has some worked examples on the site. If you google BIK on private use of a company van it pops up.
 
TheBig40 said:
If it’s commercial he can sign a declaration with the guards the it is 100% used for work and that’s the end of the BIK. If they have use of it outside of normal work they can pay a reduced BIK. Rather than end up on the wrong side of an audit you can also accept you have private use of a company van and pay BIK at 5% of the original market value which should be way less than the BIK on a saloon. I can’t add the link but revenue has some worked examples on the site. If you google BIK on private use of a company van it pops up.
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This line of reasoning is something that has cost a lot of companies money in Revenue settlements in recent years.

The definition of a commercial vehicle for motor tax purposes, and what constitutes a "passenger vehicle" versus a "van" for BIK purposes are two different things entirely.

Most crew cabs, up to the last couple of years anyway, fell into the category of passenger vehicles and accordingly they attracted BIK at the same rate as any car.

I'll have a look for a relevant link and post it here shortly.
 
torblednam said:
This line of reasoning is something that has cost a lot of companies money in Revenue settlements in recent years.

The definition of a commercial vehicle for motor tax purposes, and what constitutes a "passenger vehicle" versus a "van" for BIK purposes are two different things entirely.

Most crew cabs, up to the last couple of years anyway, fell into the category of passenger vehicles and accordingly they attracted BIK at the same rate as any car.

I'll have a look for a relevant link and post it here shortly.
Click to expand...
I’d discussions with Rev on both aspects and came out the other side with no additional bills or settlement required. I think it’s like most of this stuff, if you’re doing it right it’s not an issue. In my case on most of the company vans there is no private mileage. On my own there is some so i “happily” pay the 5% BIK. There is also some crew cabs that seem to meet the “van” requirements but I see that being closed off at some stage.
 
Somewhat unhelpfully, the relevant Tax & Duty Manual is currently unavailable as it's being updated, but the landing page on the Revenue website does contain the definition of a van (paraphrasing section 121A TCA 1997):

https://www.revenue.ie/en/employing...loyers/private-use-of-company-vans/index.aspx
A van is a vehicle which:
  • is made solely or mainly for the transport of goods
  • has a roofed area behind the driver’s seat
  • has no side windows or seating fitted in the roofed area
Any crew cab which has seats in the back will fail this test and BIK will apply on it the same as a car, regardless of whether for motor tax purposes it is classed as a commercial.

@TheBig40 like you say, if you're doing it right there's no issue - but the only way to avoid BIK arising on a vehicle is to be able to demonstrate there is a specific prohibition (real, and not simply written down and then ignored) on employees using company vehicles outside of work. I'm aware of at least one instance where Revenue were told all the vehicles were kept at the company's yard overnight and employees drive their own vehicles to & from work - so they simply sent someone out a couple of nights / mornings to see what they could see, and the company was caught telling whoppers...
 
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This gentleman would be using the crew cab outside of work on occasion. Would that mean that he is better off buying it out of salary and not through the business ? However after speaking to a garage he was informed that these are designated commercial for tax purposes. So where does that leave him ? I lso thought BIK of 4k pa on a 2014 saloon is very high ?? What is the best way for him to do this legitimately?
 
I am still trying to figure out if it is better to fund the purchase of a vehicle from a company account vs wages. Vehicle in question is a second hand crew cab.
 
In general for a car with high depreciation it is better to buy through the company and pay the BIK, for a car with low depreciation better to buy personally and claim expenses for work milage.

A shiny new BMW, buy in the company name, a 10 year old run around, buy privately.

Something in the middle, well thats in the middle.
 
One factor that may be relevant is your friend's place of work. If he is a limited company contractor using a private vehicle, he may not be able to justify mileage payments from his company to himself personally if he is based in a home office. If he has a commercial vehicle, I believe that the use of a home office as his normal place of work will not prevent him from buying diesel through the company for a van.

If your friend was happy with the original saloon car and handed it back to avoid future BIK payments, then perhaps he might consider an electric car (although they're expensive). Until 2022, there is no BIK on an electric vehicle (as long as its original market value is less than 50,000). May be worth considering.
 
Working through a very similar situation myself.

There are two things at play here; 1. registering the vehicle as a commercial & 2. BIK on the vehicle

In terms of a Crew-Cab, e.g. a toyota hilux with back seats:
1. It can be registered as a commercial vehicle which reduces the VRT and the road tax. It also means it should be insured as a commercial and will require an annual CVRT test from new.
2. BIK - Only vans (vehicle with roof and cargo area immediatly behind the drivers seat) are at the low BIK rate, and at that should only be used for work and driving to/from work. There are methods listed on the revenue for calculating BIK on all other vehicle types.

The advantages of buying a crew-cab are that it has a lower initial cost to an equivalent passenger jeep, the annual road tax will be lower and the BIK liability is lower because the initial market value doesn't include VRT (and the pesky VAT on VRT).

The rate is based on the original open market value of the vehicle. So if your friend is a 7y.o saloon that was workth €50k when new, then the minimum basis for his BIK liability is €50k less 10% maximum dealer discount, = €45k.
 
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