Who or what should own your car?
Most of you use a car on company business. Should you own it or should your company or trust?
There are two ways that you can be taxed depending upon whether you (or a trust of which you are a beneficiary) owns the car.
If the employer company owns the car, then you will pay PAYE plus VAT on the private use of the car. The amount payable is determined by your tax bracket, whether you or the company pays the fuel and maintenance cost, how much business travel was done compared to private travel and a number of other considerations. It is usually not the best route to take and not the option we would necessarily recommend as part of our Tax Returns service.
If you own the car, then you must make sure that you are paid a Travel Allowance as part of your income. Then you can claim travelling expenses up to the amount of the Travel Allowance. The claim comprises three components, a fixed portion (to cover wear and tear and insurance), maintenance costs and fuel costs. SARS publishes the figures and your claim is based on the business km divided by the total km. If your company pays the fuel and maintenance, then you only claim the fixed costs. This is usually the best option. It might therefore be beneficial to register a new company if you offer services that requires you to travel a lot, rather than having people pay you cash when offering these services.
In both cases, you’ll need professional advice and assistance and in both cases, you need to keep a logbook.
Harbour & Associates have been providing professional business services for more than 47 years. Please click here to book a FREE meeting with the owner, Derek Springett, to discuss your financial future.