Work Vehicle: Personal or Business

If you are considering buying a vehicle for your professional activity, you have two options: purchase it personally or through your business.

How to Choose the Best Solution?

Professional or personal

One of the determining factors to take into consideration is the status of the vehicle, as to whether you want it to be part of your personal or professional assets. Indeed, if the vehicle is acquired by your business, it falls within the scope of your professional assets and could be seized by your creditors in case of economic difficulty.

Purchasing the vehicle through your business

As a professional, if you buy a vehicle as part of your activity, you have the opportunity to have the purchase covered by your company. All businesses can buy a vehicle, regardless of their legal form. In this case, your company can finance the acquisition of the vehicle through a loan for example, or through personal funding. You do not need to bear the purchase costs personally.

If your business purchases the vehicle, there are several issues to consider:

Depreciation

▪ The vehicle becomes an asset of your business. It is recorded in the balance sheet and the cost is depreciated in general over a period of 5 years or in line with the capital repayments on the loan.

▪ Depreciation makes it possible to take into account the loss in value of the vehicle related to its use and to reduce the taxable profits of your business.

▪ The amount of deductible depreciation is capped at the fraction of the purchase price below a certain ceiling which depends on the CO2 emission rate of the vehicle – €30,000 or €20,300 for the "cleanest", €18,300, or €9,900 for the most polluting vehicles.

VAT

▪ Buying a passenger vehicle through your business does not allow you to benefit from the VAT.

▪ If you opt for a utility vehicle on the other hand, you will be able to claim all the VAT.

Company car tax

This applies to Sociétés and not sole traders. The purchase of a vehicle through a company entails the application to two taxes. This replaces the old tax on company vehicles and are relevant to all companies:

▪ The annual tax on CO2 emissions;

▪ And the annual tax on the age of the vehicle.

Personal Usage

If you also use the vehicle for personal purposes, this is considered a form of additional remuneration. You will have to declare this Avantage en Nature which is subject to income tax and social security contributions.

Purchase of the vehicle on a personal basis

As a business owner, you can opt for the purchase of the vehicle in your own name using your personal financial resources. The vehicle is not listed on your business’ balance sheet. In fact, the vehicle is not subject to company vehicle taxes. Naturally, VAT is not collectable. However, for the part corresponding to your professional use of the vehicle, you can be reimbursed by your business:

▪ The actual costs incurred for the professional use of the vehicle: repair and maintenance costs, insurance, fuel costs, etc.

▪ Or use the fiscal mileage scale to compensate for your costs.

These mileage allowances are not subject to income tax or social security contributions. They are also deductible for your business. Please note that the mileage scale is not the same depending on whether you are BIC or BNC.

Leasing or long-term rental: what are the implications?

If you do not want to opt for a direct purchase of the vehicle, you can consider leasing or long-term leasing. The tax advantages are similar to those applicable to the purchase of a vehicle by the business. The rental cost is deductible within the same limits as depreciation and according to the company's CO2 emission rate. VAT, on the other hand, is not deductible. Taxes on the age and CO2 emission of passenger vehicles used for an economic activity are also applicable.

The Best Choice

The right method of acquiring a vehicle for your business needs to be assessed, you need to take into account:

1. your asset choices - personal or professional,

2. the applicable taxation,

3. the impact on social security contributions,

4. the type of vehicle concerned

5. and how you use it.

For example, if you drive a lot of kilometres on a professional basis, paying mileage allowances could be more beneficial.

You can ask your accountant or business support provider to carry out a simulation on the different options for you and advise you on the most advantageous solution according to your asset objectives, the vehicle concerned, and your professional and personal usage.

It’s summer and hopefully many of you are able to go away somewhere. But before you go, you had better make sure you look at how you can be covered in case of emergencies! So, here is all you need to know about travel insurance.

You are retired and covered via the S1: The UK government will NOT cover you outside Europe, but you are covered inside Europe via the European Health Insurance Card (EHIC).

It is a free card that gives you access to healthcare during a temporary stay in any of the 28 EU countries plus Iceland, Lichtenstein, Norway, and Switzerland, under the same conditions and at the same cost (free in some countries and not in others), as people insured in that country.

Cards are issued by your national health provider (Newcastle for UK) and you can apply for it online. Some CPAM offices also provide it. Check your ameli account (CPAM website) before you ask the UK.

It is NOT an alternative to travel insurance as it does not cover costs such as return flights, repatriation, stolen goods, and it does not guarantee free service as each country’s healthcare system is different. What is free/covered in France might not be elsewhere.

Bad news is: You are NOT covered outside Europe.

You are working in France or an early retiree and covered by the French system: The same will apply inside Europe but you have to ask for the European Health Insurance Card from the French healthcare system and not from your native country.