Corporate ownership vs personal ownership
Whenever a businessperson is in the process of buying a new car, he struggles with so many questions and calls his accountant for relevant answers. I thought this is a very common and interesting subject & let me share my opinion on it.
Whenever a person buys the car on lease or on financing, it does not have any impact on his tax situation. It may have a timing difference i.e., if he buys it in the initial years, the tax cost will be high but in the later years, the tax cost will be low. Stating that, however, the total write off cannot be more than the cost of car. If you lease a car, the expenses are evenly distributed. But the important thing which we can consider is the cost of borrowing, so we must ask which rate of interest is charged on lease or financing which may be helpful to take the correct decision.
The second big question is should we buy the car in personal or business name? Here I would like to tell my readers that if the use of the car is not for the business, then DO NOT buy under business name because this may trigger an additional tax cost known as “Standby charges” and you will end up paying more tax instead of saving.
One more thing to keep in mind is that the trip from office to home or vice versa is considered as a personal trip and you cannot categorize under business use, which means if a truck driver uses his car to go from home to track yard it is considered as personal use and do not make you eligible to claim as business expense.
Another example is if a car is purchased by a real estate agent, it can be fully justified as using for business purpose and make him entitled to claim it as business expense.
If the above mentioned criteria are met then you should buy the car in business name which will make you entitled to claim HST that you have paid towards the car and you can also claim as vehicle expense against your business income.
