To register car in cc or in personal name?

[J7J]

Hi,

I have a client that has purchased a car, using money from the business account.

What would be the best from a taxation perspective (for the cc and the individual) - to

1) Register the car in the cc name and tax the individual for the fringe benefit of using the car
2) Register the car in the individual's name and then he gets a travel allowance for using his car for business purposes. The money used to purchase the car, will go to his loan account in this instance.

He pays for his fuel, oil and repairs and maintenance out of the business' account. I have allocated these expenses to his salary as a travel allowance. Is this correct?

Can he still receive a travel allowance if he is using the cc's car (if we follow point 2)?

Thanks in advance for your time and advice!

[BusNavig8]

If registered in the name of the CC- the tax saving will be 28% if a Company (I.e not a SBC or a micro business). If it is a commercial Vehicle you could claim the Vat Back of 14%. The Company Car Fringe Benefit tax in his personal capacity can be claimed back if his private mileage is less than 10 000 km for the year - he will need to keep a logbook for this - a tax saving equal to his marginal rate - again it depends what his drawings are.
If Registered in the Individuals Name then the travel allowance benefit will depend on his actual earnings from the CC - i.e what his marginal rate would likely be? 35% , 40% etc.
He can claim the deemed costs or actual expenses in terms of the travel allowance.

SARS will not allow a claim for a use of Company Car and a Travel Allowance

What I do is to work out the claim on the travel first and then apportion the salary to travel and subsistance if it applies to minimise the tax deductibility. If there is a medical aid i also do it in the personal capacity if the tax rates warrant it. (i.e marginal rate greater than 28%)

[J7J]

Thank you for your response.

SARS will not allow a claim for a use of Company Car and a Travel Allowance

So in other words, if he uses the Company Car, he will not be able to claim against his travel allowance? (even though he travelled mostly for business? And pays PAYE on this travel allowance that is mostly for business?). It is an inexpensive car that was purchased - so the fringe benefit of using the Company Car is very small. But, if he will not be able to claim against his travel allowance if he uses the company car, I think it is better if he registers the car in his own name...

[Nickolai Naydenov]

As BusNavig8 said look at where he'll save on tax in his personal capacity or on the company's name and don't forget the fringe benefit tax if it's in personal capacity.

I believe this fringe benefit tax is such load of crap because people that have travel allowance and etc really use their vehicles and now they must pay tax for that. The same is valid for policies paid towards the employee by the company and their next step is to make retirement contributions compolsory which means that if we use the logic they have then company controbutions will be taxed as fringe benefit, sounds ridiculous.

[BusNavig8]

The point of fringe benefit is for you to be taxed on the private useage of company assets. i.e had you not been in the employ of the employer you would not have received these benefits. In other words. The fringe benefit for the use of company car would be calculated as follows: Say the Value ex Vat was R80 000. The Fringe benefit is R80000 * 3.5% * 20% if 80% travel is used for business purposes. If the % for business is more than 20% a further claim can be made at year end provided a logbook has been kept. So the Fringe Benefit can be negated if it is used correctly.

There are a lot of irregularities in the act. Some prople get away with double taxation as far as RA's go. Their companies pay towards the contributions and because it is in the Taxpayers name, a certificate is issued for the full amount and the employee gets the benefit of the full contribution.

Another problem is the way in which SARS apply the 15% formula for RA's very sneaky!

[wynn]

A question for the financial/tax gurus.
What if you owned the car in your personal name and the cc hired it from you for a varying amount every month? the amount being what the fuel and maintainance cost you.

[Just Gone]

What if you owned the car in your personal name and the cc hired it from you for a varying amount every month? the amount being what the fuel and maintainance cost you.

Now theres a thought ....... ???

[Dave A]

What if you owned the car in your personal name and the cc hired it from you for a varying amount every month? the amount being what the fuel and maintainance cost you.

(Not a tax guru, but) That's a zero sum game. The individual's "income" is offset by the provable expenses.

As I see it, where things get tricky is not with direct expenses, but when it comes to dealing with the capital cost, depreciation and tax effects upon disposal of the vehicle.

[BusNavig8]

Not to mention being a connected person! playing with fire as SARS will see it as a type of tax evasion due to the fact that there are connected people involved and there is no benefit? Not worth it.