Buying an EV via LTD with low turnover
Discussion
Hi
I earn around 14K per annum through my LTD, and have around 30K sitting in the accounts. I have earn around 96K PAYE and so am reluctant to take any money out of the LTD. I am aware I could put the LTD straight into a pension, but I am also wondering if it would make sense to purchase an EV throughthe company. My accountant has not really given me an answer (on an unrelated note - I am looking for a new accountant so I can get this sort of advice..).
I was aware that there were favourable deals with LTDs/EV a year or two ago but am not sure where things are now, and whether it makes sense/is allowed with a low turnover.
Many thanks
I earn around 14K per annum through my LTD, and have around 30K sitting in the accounts. I have earn around 96K PAYE and so am reluctant to take any money out of the LTD. I am aware I could put the LTD straight into a pension, but I am also wondering if it would make sense to purchase an EV throughthe company. My accountant has not really given me an answer (on an unrelated note - I am looking for a new accountant so I can get this sort of advice..).
I was aware that there were favourable deals with LTDs/EV a year or two ago but am not sure where things are now, and whether it makes sense/is allowed with a low turnover.
Many thanks
I'm not an expert but think it will come down to affordability. Do I take it that you are working as a contractor in some sense but set up as a limited company?
As it stands you can offset the full purchase price of the vehicle against your corporation tax bill in the first year.
I bought an iX3 in Dec last year, paid the VAT as the deposit which we got back in a matter of days. Next year our corporation tax liability will be reduced by the value of the car so saving us 25% of the vehicle price in tax.
Not sure if that helps but our accountant said that quite a few of his clients were now driving EV's.
As it stands you can offset the full purchase price of the vehicle against your corporation tax bill in the first year.
I bought an iX3 in Dec last year, paid the VAT as the deposit which we got back in a matter of days. Next year our corporation tax liability will be reduced by the value of the car so saving us 25% of the vehicle price in tax.
Not sure if that helps but our accountant said that quite a few of his clients were now driving EV's.
curvature said:
I'm not an expert but think it will come down to affordability. Do I take it that you are working as a contractor in some sense but set up as a limited company?
As it stands you can offset the full purchase price of the vehicle against your corporation tax bill in the first year.
I bought an iX3 in Dec last year, paid the VAT as the deposit which we got back in a matter of days. Next year our corporation tax liability will be reduced by the value of the car so saving us 25% of the vehicle price in tax.
Not sure if that helps but our accountant said that quite a few of his clients were now driving EV's.
Thanks for the reply.As it stands you can offset the full purchase price of the vehicle against your corporation tax bill in the first year.
I bought an iX3 in Dec last year, paid the VAT as the deposit which we got back in a matter of days. Next year our corporation tax liability will be reduced by the value of the car so saving us 25% of the vehicle price in tax.
Not sure if that helps but our accountant said that quite a few of his clients were now driving EV's.
Correct re contractor. In my case the corporation tax is normally a few K at best so perhasp the savings are neglible for my case.
I usually recommend my clients lease an EV given the marketplace and current disruption from Chinese EVs. That would probably work for you and the only issue would be affordability and being able to get the lease via the ltd. 50% of the VAT can also be claimed back. Get an insurance quote first, as they are going up significantly.
MaxFromage said:
I usually recommend my clients lease an EV given the marketplace and current disruption from Chinese EVs. That would probably work for you and the only issue would be affordability and being able to get the lease via the ltd. 50% of the VAT can also be claimed back. Get an insurance quote first, as they are going up significantly.
Thanks for the reply. Are there any gains to be had by buying? I'd prefer to buy than lease and keep the car for a longer period of time.
The LTD Is not VAT registered so I wouldn't be able to benefit from that.
Edited by Jeffbrfly on Wednesday 20th March 15:03
Jeffbrfly said:
Thanks for the reply.
Are there any gains to be had by buying? I'd prefer to buy than lease and keep the car for a longer period of time.
The LTD Is not VAT registered so I wouldn't be able to benefit from that.
If you are looking to reduce tax then you have ti buy the vehicle and not lease it.Are there any gains to be had by buying? I'd prefer to buy than lease and keep the car for a longer period of time.
The LTD Is not VAT registered so I wouldn't be able to benefit from that.
Edited by Jeffbrfly on Wednesday 20th March 15:03
Going by your's and the other replies I think you need advice from a good accountant but I suppose it also depends how much you spend on the car as to wether it is a worthwhile or not.
curvature said:
I'm not an expert but think it will come down to affordability. Do I take it that you are working as a contractor in some sense but set up as a limited company?
As it stands you can offset the full purchase price of the vehicle against your corporation tax bill in the first year.
I bought an iX3 in Dec last year, paid the VAT as the deposit which we got back in a matter of days. Next year our corporation tax liability will be reduced by the value of the car so saving us 25% of the vehicle price in tax.
Not sure if that helps but our accountant said that quite a few of his clients were now driving EV's.
How did you get the vat back? I assume it’s 100% business use no private use at all? As it stands you can offset the full purchase price of the vehicle against your corporation tax bill in the first year.
I bought an iX3 in Dec last year, paid the VAT as the deposit which we got back in a matter of days. Next year our corporation tax liability will be reduced by the value of the car so saving us 25% of the vehicle price in tax.
Not sure if that helps but our accountant said that quite a few of his clients were now driving EV's.
Are you actively trading through the Ltd company?
If HMRC start to think you only have it for tax advantages like this, it'll be frowned upon. And you don't want aggro from them.
It also wouldn't be wise to show a big loss as a result of a car purchase.
You need a better accountant, and to tell them you want to avoid being bummed by HMRC at all costs.
I suspect at that point you'll buy it privately
If HMRC start to think you only have it for tax advantages like this, it'll be frowned upon. And you don't want aggro from them.
It also wouldn't be wise to show a big loss as a result of a car purchase.
You need a better accountant, and to tell them you want to avoid being bummed by HMRC at all costs.
I suspect at that point you'll buy it privately
Jeffbrfly said:
Thanks for the reply.
Are there any gains to be had by buying? I'd prefer to buy than lease and keep the car for a longer period of time.
The LTD Is not VAT registered so I wouldn't be able to benefit from that.
There are pros and cons to buying versus leasing in terms of tax. If you have the profits available, you can get all the tax relief up front. Your issue would be offsetting the cost of the vehicle against your profits, as the vehicle will be more than one year's profits. You could carry back or carry forward, or even restrict the allowances. As you suggest, you need to run through the scenarios with a decent accountant.Are there any gains to be had by buying? I'd prefer to buy than lease and keep the car for a longer period of time.
The LTD Is not VAT registered so I wouldn't be able to benefit from that.
Edited by Jeffbrfly on Wednesday 20th March 15:03
Murph7355 said:
Are you actively trading through the Ltd company?
If HMRC start to think you only have it for tax advantages like this, it'll be frowned upon. And you don't want aggro from them.
It also wouldn't be wise to show a big loss as a result of a car purchase.
You need a better accountant, and to tell them you want to avoid being bummed by HMRC at all costs.
I suspect at that point you'll buy it privately
He says he's earning £14K a year, so is trading. There's no absolutely no issue with showing a loss due to the purchase and he wouldn't be remotely on HRMC's radar because if it. Don't forget, he even has cash to cover it. As long as he submits a P11D for the benefit in kind, he would be complying with the tax rules and is 100% eligible to have an electric car.If HMRC start to think you only have it for tax advantages like this, it'll be frowned upon. And you don't want aggro from them.
It also wouldn't be wise to show a big loss as a result of a car purchase.
You need a better accountant, and to tell them you want to avoid being bummed by HMRC at all costs.
I suspect at that point you'll buy it privately
My LTD is only part of my overall income, though I am VAT registered, and I too don’t take much out of it because of not wanting to be shafted again by the taxman. My accountant advised leasing over buying. Beyond purely company fiscal considerations, I’d be always concerned about buying a BEV when the tech is improving so rapidly and the cars are depreciating considerably at the moment.
One of the advantages of contract hire is being able to claim back 50% of the vat on the contract. 100% vat is recoverable on maintenance, tyres, repairs. But no advantage if you aren’t vat-registered
If you don’t have huge profits to mop up then buying used will slow down the tax relief on the purchase and match better to modest profits. Yes there is risk from hideous depreciation but that’s all happening before tax so hard bears a lot of the risk
You would be able to get all charging costs paid by the company with no benefit in kind to pay on that. Annual benefit in kind on the cars is currently list price x 2%, g=but going up 1% a year to 5% over the next 3-4 years
If you buy a car used with list price £40k then benefit in kind is £800 (at the moment) and all the insurance, maintenance, tyres, depreciation comes out of pre-tax income
One of the joys of an ev through a company and having additional employment or self-employment is that the company bears all the costs for low personal tax burden and doing business mileage for your separate employment / self-employment gets the 45p per mile tax deduction. Which could result in effective negative tax on the car
If you don’t have huge profits to mop up then buying used will slow down the tax relief on the purchase and match better to modest profits. Yes there is risk from hideous depreciation but that’s all happening before tax so hard bears a lot of the risk
You would be able to get all charging costs paid by the company with no benefit in kind to pay on that. Annual benefit in kind on the cars is currently list price x 2%, g=but going up 1% a year to 5% over the next 3-4 years
If you buy a car used with list price £40k then benefit in kind is £800 (at the moment) and all the insurance, maintenance, tyres, depreciation comes out of pre-tax income
One of the joys of an ev through a company and having additional employment or self-employment is that the company bears all the costs for low personal tax burden and doing business mileage for your separate employment / self-employment gets the 45p per mile tax deduction. Which could result in effective negative tax on the car
MaxFromage said:
curvature said:
If you are looking to reduce tax then you have ti buy the vehicle and not lease it.
You mean if you want to reduce your tax all in one go you have to buy. Leasing will spread the tax saving.The tax benefit is that the company pays for the EV, you get a car that you hardly have to pay any BIK on.
Assuming you need a car, it makes complete sense to sack off whatever private car you have and lease through the company. Given your PAYE earnings it's the only way you can take 'money' out of the LTD without paying a lot of income tax. Obviously it's not really money, it's a car - but you get a car that costs £500 (or whatever) a month to lease and the only cost to the company is the cost of that lease. If you were to spend £500 on a car privately, you would need to take almost double that from the company to pay for the same car.
You can also put servicing/insurance/maintenance through the company.
If your accountant isn't up to date with the obvious benefit of EV leasing through an LTD then that's disappointing. For several years now it's been an (almost) tax free way of bankrolling an expensive new car on the cheap. The tax break is literally there to be taken advantage of - the powers that be want you to take advantage of it - this is how they're feeding new EV's into the market.
Can someone enlighten me on this VAT refund please? As I understand it’s only if the vehicle is 100% used for business?
curvature said:
I bought an iX3 in Dec last year, paid the VAT as the deposit which we got back in a matter of days. Next year our corporation tax liability will be reduced by the value of the car so saving us 25% of the vehicle price in tax.
DSLiverpool said:
Can someone enlighten me on this VAT refund please? As I understand it’s only if the vehicle is 100% used for business?
Correct. The legislation is incredibly limited, but unfortunately a significant number of people believe you can claim the vat back on EVs for some reason. Some of the measures to meet the criteria would be storing at your work premises and only being insured for business use.Gassing Station | EV and Alternative Fuels | Top of Page | What's New | My Stuff