Buying an EV via a Ltd company

Buying an EV via a Ltd company

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anonymous-user

Original Poster:

53 months

Thursday 25th April 2019
quotequote all


I've heard there are some benefits for buying an EV through a ltd company. Has anyone done this for an outright cash purchase? I'm wondering how much can I expect to save exactly in money terms?

Let's say 40k. Bought 1st May 2019.


I could buy it and rent it back to myself is that right? I've heard the term BIK but no idea what it means.



Edited by anonymous-user on Monday 29th April 22:30

anonymous-user

Original Poster:

53 months

Thursday 25th April 2019
quotequote all
I'd have thought the advantage is in the really low benefit in kind value of the EV.

So the co gets to write off the running costs and you have a relatively low personal tax bill.

skilly1

2,700 posts

194 months

Thursday 25th April 2019
quotequote all
BIK is benefit in kind. The company car is seen by the tax man as an extra income and it is taxed. The tax is due by the person driving it. Each type of car has a different BIK rate, a lower BIK means lower tax to pay.
Electric cars have a very low BIK so it’s a cheap way to have a company car.
The difference in tax between me driving a 330d vs a i3 was about £330, per month saving out of my take home pay. Pretty significant.

anonymous-user

Original Poster:

53 months

Thursday 25th April 2019
quotequote all
That sounds cool .

So how do i work out how much I saveon an outright purchase, based on the above for a 40k model 3?

Edited by anonymous-user on Thursday 25th April 20:22

anonymous-user

Original Poster:

53 months

Thursday 25th April 2019
quotequote all
Pick the car you want.
Google the BIK value and then work out your personal tax.


Ryder35

355 posts

184 months

Thursday 25th April 2019
quotequote all
sambucket said:
That sounds cool .

So how do i work out how much I saveon an outright purchase, based on the above for a 40k model 3?
Not an accountant but you get 50% VAT back for an EV as far as I can remember. Also can't see why you would rent it to yourself. You just buy on the company and then pay BIK for using it.

Have you considered leasing though the company, might work out cheaper and safer with the rapid development in EVs?

oop north

1,592 posts

127 months

Thursday 25th April 2019
quotequote all
Keeping it simple, if you buy a new one (used doesn’t get you this) the company gets a 100% write down in the current accounting period. So corporation tax saving (9 months after the year end) is 19% x cost). When you come to sell it, you will suffer corporation tax on the entire proceeds. This is not as big a benefit as most people seem to think (in my view) - i got my i3 on contract hire and the iPace (coming on Monday) is also on contract hire which I think is better (half the vat back).

The benefit in kind is currently (until 5 April 2020) 16% x list price. You pay income tax on that figure. The company also pays employer’s national insurance at 13.8% on that (but you get tax relief on that NIC).

From 6 April 2020, the bik drops to 2% x list price.

All electricity used to charge the car if paid by the company gets corporation tax relief (I calculate the cost each month of home charging and charge my company that). You can also get the company to pay you 4p per business mile tax free even when the company is paying all the electricity. The cost of the charger at home (and / or the office) is tax deductible also.

anonymous-user

Original Poster:

53 months

Thursday 25th April 2019
quotequote all
sambucket said:
I've never considered anything.

I want to buy a model 3 next week, and just need to decide which debit card to use.
I'd ask your accountant then.

On the face of it buying through the company makes sense but they will know best.

anonymous-user

Original Poster:

53 months

Thursday 25th April 2019
quotequote all
My accountant has just had a kid, so I want some degree of confidence the saving is significant before I bug her.

I thought someone else might be in the same boat, given model 3 pent up demand etc.

anonymous-user

Original Poster:

53 months

Thursday 25th April 2019
quotequote all
sambucket said:
My accountant has just had a kid and want some degree of confidence the saving is significant before I bug her.
Change accountants then.

anonymous-user

Original Poster:

53 months

Thursday 25th April 2019
quotequote all
Can you actually purchase a 3 next week?

In company car terms, the clock starts running, AIUI, on the date the car is available for you to drive. You wouldn’t want to pay tax on a car that hasn’t even be built!


SOL111

627 posts

131 months

Thursday 25th April 2019
quotequote all
Ryder35 said:
Not an accountant but you get 50% VAT back for an EV as far as I can remember. Also can't see why you would rent it to yourself. You just buy on the company and then pay BIK for using it.

Have you considered leasing though the company, might work out cheaper and safer with the rapid development in EVs?
Unfortunately you can't claim any of the vat on a purchase. Only if you're leasing. Iirc vat only applies to very specific scenarios (taxi drivers for instance, iirc).

You can only claim the CT, which can be claimed in full in the first year.

anonymous-user

Original Poster:

53 months

Thursday 25th April 2019
quotequote all
SOL111 said:
Unfortunately you can't claim any of the vat on a purchase. Only if you're leasing. Iirc vat only applies to very specific scenarios (taxi drivers for instance, iirc).

You can only claim the CT, which can be claimed in full in the first year.
So in terms of CT, 40k x 0.19 is £7.6k. If I don't sell the car anytime soon?

Then BIK. 40 x 0.16 is 6.4k. I pay income tax on that figure? Where does the 6.4 come from and go to?

Still seems odd this is allowed for 100% personal use. Shouldn't all expenses be for exclusive use by the business?



Edited by anonymous-user on Thursday 25th April 22:48

anonymous-user

Original Poster:

53 months

Thursday 25th April 2019
quotequote all
In terms of running expenses it's the same as any other company car, just with a low BIK to encourage take up of EV.

EddieSteadyGo

11,721 posts

202 months

Thursday 25th April 2019
quotequote all
sambucket said:
Then BIK. 40 x 0.16 is 6.4k. I pay income tax on that figure? Where does the 6.4 come from and go to?
You are multiplying the RRP value of the car by HMRC's BIK percentage. This gives the value of the 'benefit in kind' you are receiving as an individual, being given a company car. In your example, this is £6,400.

You multiply this figure by your nominal tax rate e.g. 20% or 40%. So if you are a higher rate tax payer you would pay circa £213 per month in additional tax for gaining the use of a company car.

Your company will also need to pay national insurance on the BIK benefit given to you as its employee.

As was discussed on the other thread a few days ago, this method doesn't make a lot of sense until April next year when the BIK percentage rate for EVs drops to 2%.

At that point, the £6,400 value of the benefit reduces to £800. So your individual tax would reduce to £27 / month, if you were a higher rate tax payer.

You can also charge the normal expenses for running the car like insurance, maintenance, tyres etc to your company, so these are effectively paid out of untaxed income.

Overall, unless you are happy to pay the extra tax now, I'd wait until next April before receiving the car. Then just decide with your accountant whether it makes sense to lease the car (which allows half of the VAT to be reclaimed) or for the company to buy the car.

Either of these two options will likely be much cheaper than buying an EV as an individual out of your taxed personal income.

SOL111

627 posts

131 months

Thursday 25th April 2019
quotequote all
sambucket said:
SOL111 said:
Unfortunately you can't claim any of the vat on a purchase. Only if you're leasing. Iirc vat only applies to very specific scenarios (taxi drivers for instance, iirc).

You can only claim the CT, which can be claimed in full in the first year.
So in terms of CT, 40k x 0.19 is £7.6k. If I don't sell the car anytime soon?

Then BIK. 40 x 0.16 is 6.4k. I pay income tax on that figure? Where does the 6.4 come from and go to?

Still seems odd this is allowed for 100% personal use. Shouldn't all expenses be for exclusive use by the business?



Edited by sambucket on Thursday 25th April 22:48
Ah, I didn't say that this will be allowed for 100% personal use. That may be possible but you'll have to check.

Regarding the corporation tax, you can claim that figure back in the first year but you'd have to speak to your accountant about the implications, should you sell the car. Personally I wouldn't bother as you'll lose all benefit from the company owning it e.g. RFL, servicing, insurance etc.

Note that you can also claim the vat/CT on a home charge point but can't then claim the government grant. Therefore you need to think about the pros/cons of paying personally or through the business.

As for the bik. The £6.4k represents the taxable value of bik. You then pay 20 or 40% of this value in personal tax.

Hope this helps.

Wilmslowboy

4,189 posts

205 months

Thursday 25th April 2019
quotequote all
sambucket said:


Let's say 40k. Bought 1st May
Try and keep the list price with options, below £40k, other wise it's an extra £320 a year in VED (years 2 to 6)

EddieSteadyGo

11,721 posts

202 months

Thursday 25th April 2019
quotequote all
SOL111 said:
Ah, I didn't say that this will be allowed for 100% personal use. That may be possible but you'll have to check.
It is allowed for 100% personal use.

The company is effectively buying a car for its employee to use as a staff benefit in lieu of perhaps extra salary.

This is why the car incurs a personal 'benefit in kind' tax based on the government's view of the approx value of the benefit being received. It is also why the company has to pay national insurnace on the benefit being received by the employee, just as it would if the money was being paid as a salary to the employee.

oop north

1,592 posts

127 months

Thursday 25th April 2019
quotequote all
sambucket said:
Still seems odd this is allowed for 100% personal use. Shouldn't all expenses be for exclusive use by the business?
Edited by sambucket on Thursday 25th April 22:48
100% private is fine. Your salary is deductible but is used entirely for private / non business purposes! You are anyway assisted by low emission vehicles being allowed on salary sacrifice basis as with pension contributions

anonymous-user

Original Poster:

53 months

Thursday 25th April 2019
quotequote all
EddieSteadyGo said:
You are multiplying the RRP value of the car by HMRC's BIK percentage. This gives the value of the 'benefit in kind' you are receiving as an individual, being given a company car. In your example, this is £6,400.

You multiply this figure by your nominal tax rate e.g. 20% or 40%. So if you are a higher rate tax payer you would pay circa £213 per month in additional tax for gaining the use of a company car.

Your company will also need to pay national insurance on the BIK benefit given to you as its employee.

As was discussed on the other thread a few days ago, this method doesn't make a lot of sense until April next year when the BIK percentage rate for EVs drops to 2%.

At that point, the £6,400 value of the benefit reduces to £800. So your individual tax would reduce to £27 / month, if you were a higher rate tax payer.

You can also charge the normal expenses for running the car like insurance, maintenance, tyres etc to your company, so these are effectively paid out of untaxed income.

Overall, unless you are happy to pay the extra tax now, I'd wait until next April before receiving the car. Then just decide with your accountant whether it makes sense to lease the car (which allows half of the VAT to be reclaimed) or for the company to buy the car.

Either of these two options will likely be much cheaper than buying an EV as an individual out of your taxed personal income.
Thanks a lot. That's super clear.

Wow I was expecting something like high 3 figure savings, so this sounds like a no brainer.

Assuming company cars are eligible for the incentive, that means from April, buying a base model 3 for 39k looks something like this?

39k
- 3.5k (tax incentive)
- 7.6k (ct tax avoided)

= 27.9k

Then it sounds like 2% BIK is at partly balanced by income tax savings on expenses.

If gov wants to incent EVs they should expand to personal purchases too!?