Selling a commerical vehicle to a director

S

s2000

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Hi there,

I have a Crew Cab Jeep. 1 year old. If I wanted to sell this to myself (director of the company) for my own use can I sell it to myself at a real bargain or are there "rules" of depreciation for this sort of thing??

Thanks a mil,

A
 
Check out http://www.irlgov.ie (www.irlgov.ie) - go to Irish Statute Book. Find section 29 Companies Act, 1990. I tried to cut and paste it here but it goes on a bit! I can do so if you can't find it.

It deals with: "Substantial property transactions involving directors, etc."

I'm only a trainee solicitor and have never practised company law or worked in a commercial firm but that section may clarify it for you!
 
A sale of an asset at undervalue to you would be probably treated as a dividend and subject to tax.
 
s2000 said:
Hi there,

I have a Crew Cab Jeep. 1 year old. If I wanted to sell this to myself (director of the company) for my own use can I sell it to myself at a real bargain or are there "rules" of depreciation for this sort of thing??

Thanks a mil,

A
Click to expand...

Simple answer, no. all transactions have to be at arms length, and valued at current market value.
 
Section 29 provides that a resolution has to be passed. Does that mean if the members agreed it could be sold at undervalue? I wasn't sure about that, but I think that it can't.
 
LouisLaLoope said:
Section 29 provides that a resolution has to be passed. Does that mean if the members agreed it could be sold at undervalue? I wasn't sure about that, but I think that it can't.
Click to expand...

What's permitted under company law and what Revenue implications there are from such decisions are very different. Company law may or may not ( from what you said, I haven't looked it up) permit such transactions. However the Revenue implications of so doing impact on both the company and the individual purchasing from a Corporation Tax viewpoint - where Capital Allowances may already have been claimed on the vehicle to an Income Tax viewpoint - the benefit to the individual to a VAT viewpoint, the company may have claimed VAT on the purchase and will therefore owe VAT on the sale.

Take the analogy of a company giving €10,000 loan to a director. As long as that is within company law limits ( 10% of net assets ) then it is legal. However from a Revenue point, it has tax implications for the company, in regrossing the loan and paying 20% tax on it , and down the line if the loan was forgiven there would be further adjustments for the director.

I would re-iterate previous posters. Must be arms-length transaction.
 
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