The Marketing Director’s son (aged 18) has recently passed his driving test, and he is keen to provide the son with a car. An acquaintance has told him that it would be cheaper for the company to provide the car, especially if it were a low-emission car. The Director has identified such a car, and it has list price of £9,600, including VAT. It has CO2 emissions of 99g/km, and it is petrol driven.
The cost to add the son to the group insurance policy would be £500, the servicing costs are estimated at £300, and the car tax would be £0.
The Managing Director’s marginal rate of tax is 50%, and there is no discount available to the company for purchasing this car.
The Personnel Manager has asked you to explain why it may be cheaper for the company (rather than the Director to provide a car privately) to provide a car for the son, and if the company does so provide the car, to investigate the costs (both for the company and the Managing Director) and Capital Allowances available for providing the car for his son.
here is my answer
first according to the inland revenue , if a director provides a car for a member of his household the taxable benefit or benefits in kind will be charged to the director and director will be liable to pay a tax this means on top of his BIK. furthermore the company will have to pay Class 1A NIC. and for capital allowance purpose the car is eligible for FYA. as the director pays higher tax , his or tax will increase further.
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