Accountant Explains | Tax Implication of Lease Car

#accountantexplain #taxes #lease Tax Implication of leasing car: You can claim back 100% Vat on payments if the vehicle is used solely for business purposes, this reduced to 50% if it used for personal journeys too. However, if you proved that car will be used for only business purpose (it will be used as pool car during business hours) and will remains on company property you can claim 100% VAT. In leasing we cannot record leasing car as an asset in company balance sheet and simultaneously we are not recording any finance lease liability. That is why we cannot claim capital allowance on leased car since we are not the car owner and are not buying outright. Fuel/petrol and cost of electricity for electric cars are only deductible if the trips are for business purpose. And lease payments are tax deductible expense which means we can offset these against corporation tax which obviously reduce corporation tax bill. However, from April 2021 you must disallow 15% of lease payments if CO2 emissions are more than 50g/km. Accounts and Corporation Tax: In leasing we cannot record leasing car as an asset in company balance sheet and simultaneously we are not recording any finance lease liability. This is why we cannot claim capital allowance on lease car since we are not the car owner. However, if you have an agreement with leasing company and after certain period of lease lets say 3 years you will own the car instead of returning back to them, then we will record it as an asset and finance lease liability and also we will claim capital allowance on it. Expenses like repair and maintenance, car insurance are deductible expenses. And fuel/petrol and cost of electricity for electric cars are only deductible if the trips are for business purpose. Which means these expenses will reduce taxable profit and then corporation tax liability. Personal Tax Return: If the car is being use for private use. Then company will declare car on P11D and pay national insurance contribution. As well as director/employee whoever is using car for private journey will declare that car on his personal tax return and pay income tax on benefit in kind. Timecodes: 0:00 – Intro & Disclaimer 0:23 – Value Added Tax 2:10 – Accounts and Corporation Tax 4:44 – Personal Tax Return 6:34 – Conclusion accountant explains how I manage lease car financial knowledge channel uk accounting investment analysis