Company Car Lease - Corp Tax Deductions

[rawy]

Hi All,

If an electric car (0g/km) is leased by a company for an employee's company car (inc personal use) can the lease monthly payments be deducted against corporation tax 100%?

From reading online 100% can be deducted due to it being under 110g/km, but I'm not sure if this is only if the car is used 100% for business use.

I understand 50% of the VAT can be claimed back (inc personal use)

So the cost to the business on a £420 inc vat lease would be as follows? :

£420 - 10% VAT = £378 - 19% Corp Tax deduction = £306.18

I'd greatly appreciate the PH wisdom on this, if correct, can anyone share a link to HMRC confirmation on the above?

BIK for the company car driver would be 0% until April, then 1% 2021 & 2% 2022.

Thanks

Rawy

[MOBB]

I believe you are correct 100%

[Eric Mc]

What type of lease is it - an operational lease or a finance lease?

[rawy]

It will be an operational lease, there will be no option to purchase at the end of the lease.

Thanks

Rawy

[MaxFromage]

The use of the vehicle doesn't matter, it could be 100% private.

However your VAT calc is incorrect. It's a common mistake when people take 10% straight off the top. Half the VAT on £420 is actually £35, so your net after corporation tax is £312.

[Jockman]

We do this on contract hire for 3 Tesla model S.

We also did the same for BMWs with old style combustion engines (sorry, couldn’t resist).

[bunn89]

So am I reading this right

A fully electric Car or Van

The full 100% Payment is deducted against corp tax / profits for the year?

And that the vehicle can be used for both business and personal use

[Eric Mc]

rawy said:

It will be an operational lease, there will be no option to purchase at the end of the lease.

Thanks

Rawy

Then the offset in the profit and loss account is the simple rental payments with the appropriate VAT reclaimed on each rental payment.

The company cannot capitalise the car in the balance sheet, it cannot calculate and offset depreciation and it cannot claim Capital Allowances.

[CaptainSlow]

Eric Mc said:

The company cannot capitalise the car in the balance sheet...

They will need to if reporting under International or USGAAP.

ETA
By showing the Lease as an asset with corresponding liability.

[rawy]

Thanks for all your help.

Is there a HMRC document or link I can point our finance team to, as they are questioning the legitimacy.

Cheers

Rawy

[Eric Mc]

In what way is HMRC questioning the legitimacy?

[MaxFromage]

rawy said:

Thanks for all your help.

Is there a HMRC document or link I can point our finance team to, as they are questioning the legitimacy.

Cheers

Rawy

Ask them to speak to their accountants.