Motor tax – Keeping on the right side of the taxman

Business class
Posted by Michael Rochford on 8 September 2015 in New Cars, Used Car Buying Tips, Used Cars

 

It’s coming up to October and, sorry to scare you with the reminder, but that means it’s tax return time. I know, I know but hey – there are plenty of legal and above-board ways to minimise your tax bill and I’m sure your friendly local accountant will be able to help you with that.

What’s not a good way to save yourself some tax money is to buy a commercial vehicle and use it as a daily driver. Now, there are some tempting savings to be had out there, and there’s currently a loophole in the law that allows several big, luxury SUVs to be, technically, sold and taxed as a commercial even when they have a full five-seat cabin. Usually swathed in leather for good measure. Land Rover, Toyota, Jeep, Mitsubishi and others all make such cars, usually called something like Business Edition or even Business Utility Vehicle. Meanwhile, the pickups like the VW Amarok, Mitsubishi L200 and Toyota HiLux are becoming ever more car-like and comfy, and make great day-to-day vehicles.

 

Tax classification anomalies

 

Now, on the one hand, you can save yourself a bundle at purchase time, because the commercial rate of Vehicle Registration Tax is just 13 per cent and that means that these cars, heavy on Co2 at the best of times, are much, much cheaper to buy as a commercial. By way of example, take the Jeep Grand Cherokee. Normally, a decently-specced variant will set you back north of €60,000 but the BUV version, thanks to simply having a divided cargo space, will cost you less than €50,000. Now that’s a seriously tempting saving and one that is entirely safe for you to enjoy – any private individual can do so.

Business class 2The problem comes when you put a tax disc in the window. Now, a standard Jeep Grand Cherokee, thanks to its high Co2 emissions, has an annual motor tax cost of €1,250. In commercial form though, you could potentially tax it for just €333 a year, a saving of more than €900 annually. That is just massively tempting.

Tempting, but restricting, and potentially illegal. You see, you’re only entitled to benefit from the sav-ing of commercial motor tax if you actually buy the vehicle for business use and use it “strictly for the carriage of goods in the course of trade and business.”

That goes double for your passengers. Anyone sitting in the back or passenger seat must be em-ployed by you or the company for which you work, and be travelling for purposes of work. Even travelling to and from work doesn’t count, and you can well imagine how much dropping your kids too and from school or playgroup equally doesn’t count.

 

Business or Personal

 

Now, surely, you’re thinking that things can’t be that draconian. Surely one can buy a vehicle such as this and be able to use it for social, domestic and pleasure purposes as well as work? Well, yes you can but again it’s down to the tax. You can buy a car such as this, and declare at the time of taxation that you’re going to use it as a private car as well, and pay your €1,250.

Ah, except you can’t. You see, if you buy a commercial and then go and tax it as a passenger car, then for some arcane reason you don’t tax it according to the Co2 emissions, but you revert to the old engine capacity system and, thanks to most of these cars having 3.0-litre engines, that means annual tax of just over €1,400. Not such a saving after all.

 

What of repercussions

 

Business class 3So it’s no wonder that many people would be tempted to bend the rules and go for the €333 commercial rate tax. Indeed, the Gardai have recently come out and openly said that, essentially, they have better and bigger things to worry about and they won’t be concentrating on this as an offence.

Still though, technically, it’s against the law and you are setting yourself up for a potential fine. True enough, the Gardai have better things to be doing but if you were stopped for, say, speeding or using your mobile, and you had your kids in the back and you had the commercial rate tax disc in the windscreen? Well, you can imagine the size of the book that would be then thrown at you, and the fines for mis-taxing a vehicle run to around €4,000.

So, here’s the simple advice. Buy one of these cars – they’re all great, and hugely practical and whether you’re buying new or used, you’ll save a fortune. But make sure you tax them as a private car. Yes that makes annual motor tax expensive, but you’ve already saved yourself circa €20k, so come on… Let’s all make the best use of the systems that are out there, but let’s also play by the rules, right?

 

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