(Electric) Company Car 'v' (Non Electric) Personal Car

(Electric) Company Car 'v' (Non Electric) Personal Car

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Discussion

Hobo

Original Poster:

5,755 posts

245 months

Thursday 15th August 2019
quotequote all
Hopefully someone on here has the time (and inclination) to respond to my query, as everyone I ask seems to give me a differing answer on the question.

I currently have an Audi A6 for general work stuff, which on personal lease costs me circa £350.00 per month. If was up for renewal in June but I extended it for 6 months as was looking at potential replacement options, and if I'm honest had not done anything in time.

I have my own business, Limited Company, VAT registered (flat rate scheme at present) consulting to various clients.

I looked at Jaguar I-Pace as an option, but more recently the Audi E-Tron, as prefer the look of these. I don't do any real long trips (the very occasion drive to London) but 95% of my journeys are less than 20 miles.

So... with BIK on the Audi (or Jaguar) being 0% for 2020/21, 1% for 21/22 & 2% for 22/23 if seems an ideal time to get one on a 3 year lease through the business. That's the logic anyway.

What I am thinking is;

1. I lease the Audi, and it costs me circa £550.00 per month (plus VAT), so £660.00 in effect (which is some £310.00 per month more than the current A6)
2. I can potentially claim 50% of VAT on payments, reducing the monthly actual cost to £605.00 (still some £255.00 per month more than the current A6)
3. My fuel bills vanish, which are only circa £75 per month (at this point the e/o cost of the current A6 reduces to circa £180.00 per month)


However, the actual cost of me withdrawing £350.00 per month at present to pay for the A6 is nearer £525.00 per month as I pay 32.5% on these drawings as a dividend. This additional £175.00 therefore reduces the e/o cost for the E-Tron, over that of the A6 to £5/month) - from note 3 above.

Is this correct so far ???


Finally, as this would be a new car, I believe I can write an amount of the price of the car off again corporation tax for the company, thus reducing my annual tax bill. This is the bit I genuinely am not sure on, but seems to be 100% of the price in the first year. So for example, say my company turns over £150,000.00 and has no real outgoings of any sort, so in essence is all profit, and I pay myself in dividends, what does this mean in the real world for figures.

To me, going electric seems to be a no brainer, as whilst the monthly amount leaving my bank will be more per month, over the financial year I will be significantly better off.


Right/wrong ???

lost in espace

6,136 posts

206 months

Thursday 15th August 2019
quotequote all
If you lease you can't write it off as a first year allowance, needs to be PCP or outright purchase. And when you sell/return to PCP company the opposite of the first year allowance (chargeback or whatever the term is) happens for the remaining value as I understand it. The first year allowance is a loan as such, in the case of the Model 3 the residual value after 4 years is £17k so you have to pay tax back on this.

I am NOT an accountant, just as I have read it.

Guffy

2,310 posts

264 months

Thursday 15th August 2019
quotequote all
Assume you have an Accountant Hobo, since you're running a limited company?

I'm in a similar position, looking to go electric next April, although my Accountant is not so convinced about the benefits, although he's ultra conservative about everything!

I don't believe you can claim the electric trough your business if the vehicle is also for personal use.




Jacobyte

4,718 posts

241 months

Thursday 15th August 2019
quotequote all
That's one way of doing it.

But if your company pays you a salary before dividend, you could arrange for the company to lease a car and then set up a personal salary-sacrifice to save the PAYE and NI:

So assuming you can find a lease at the same monthly cost, the £605 that you calculated here...

Hobo said:
2. I can potentially claim 50% of VAT on payments, reducing the monthly actual cost to £605.00
... minus the 20% PAYE and 12% ni becomes £411.40

... minus £75 for the fuel, which becomes £336.40

Plus the BIK to go on your P11d, which will be £insignificant in the grand scheme of things.

Any use?

oop north

1,592 posts

127 months

Thursday 15th August 2019
quotequote all
Guffy said:
I don't believe you can claim the electric trough your business if the vehicle is also for personal use.
Incorrect

Hobo

Original Poster:

5,755 posts

245 months

Thursday 15th August 2019
quotequote all
Complicated stuff it seems … I've asked my accountant and their response seemed a little wooly to say the least. I don't think they are up to speed with this side of things at present.

It would however seem my basic logic is correct, with exception of the ability to offset the price of the car against corporation tax, which is far from the end of the world, but would have been an added bonus.

The other thing I failed to add was that if I do business mileage, I charge my clients 45p per mile as my contracts with them. I appreciate this is a rate set by the government for petrol/diesel cars, but my contract says nothing, so I can still charge the same for an electric car. If I do even 250 miles per month which I can book to clients, that gives me a further £112.50 for, in essence, free.

That then takes me to the point that I would be £107.50 better off driving a £70,000.00 electric car hired through the business, than a £40,000.00 petrol car hired personally.

Again, I think this is right ???

oop north

1,592 posts

127 months

Thursday 15th August 2019
quotequote all
Sorry I only gave a short answer before smile. It is complex, but here are a few pointers - I have an iPace through my company and previously had an i3.

You can either have the company pay you 45p per business mile for use of your own car (first 10k pa - 25p thereafter) - or use a company car. You cannot have a company car and have the company pay you 45p per business mile

From next April it is almost impossible to think of a situation where an EV doesn’t work out better than ICE car from a tax perspective. This year I am not much better off with the jag over an ICE car but over three years (one bad and two good) the post tax cost will be roughly the same as buying privately something like a nearly new bmw 530d for around £30k

My personal view on the buy the car outright and get 100% corporation tax deduction in year one is (1) not as good as it sounds - you suffer full VAT, and you pay CT on full proceeds when you sell, so it’s on my a timing difference not a permanent benefit anyway, which is limited benefit with low interest rates (2) better to do contract hire as can reclaim 50% VAT and you are not funding any VAT

To work out the answer accurately you need to consider VAT, corporation tax, national insurance, income tax, dividend tax

Hobo

Original Poster:

5,755 posts

245 months

Thursday 15th August 2019
quotequote all
Sorry, the 45p per mile is not what my company will pay me, it is the contract I have with all my clients, ie that for any business miles I do on behalf of them I charge them 45p. It's somewhat irrelevant what the government say on this to me, I could charge 1p, I could charge £10. It just an agreement I have, to which I add this to my invoice to clients.

Hobo

Original Poster:

5,755 posts

245 months

Thursday 15th August 2019
quotequote all
I called down to the local Audi dealer this afternoon to look around their shownroom e-tron. They are very nice, although not sure 75k worth of nice, however when I looked at the I-pace also I got the same feeling. Clearly at present you are paying for the technology.

The residuals on them after 3 years I believe are expected at circa 53%, so not too shabby, hence no doubt the relatively inexpensive monthly lease costs.

oop north

1,592 posts

127 months

Thursday 15th August 2019
quotequote all
Hobo said:
Sorry, the 45p per mile is not what my company will pay me, it is the contract I have with all my clients, ie that for any business miles I do on behalf of them I charge them 45p. It's somewhat irrelevant what the government say on this to me, I could charge 1p, I could charge £10. It just an agreement I have, to which I add this to my invoice to clients.
Ah, OK. As a general rule anything that is the same either way you go, you just ignore completely as its irrelevant

Acm123

17 posts

56 months

Thursday 15th August 2019
quotequote all
I’ve just done this by taking out a 2 yr lease on an etron

All the payments and insurance can be paid by your company pre tax ie saves your company the corp tax.

As you know , previously the 16% BIK was the government claw back of that tax relief but from apr next yr it’s as you say 0,1 then 2% thereafter. There’s the big saving and makes the whole thing a no brainer assuming an EV suits your use.

I’m not VAT registered (medical practice) so can’t claim any of that back and in truth don’t know if I can claim some of the overnight charging costs back. Don’t really care.

The way I look at it is I would have to earn about £ 1k each month to pay for a £600 lease but now I only have to earn £600.

Ps I think the new BIK will push EV demand up significantly for company car drivers. Will be interested to see if lease cost rise in parallel. You might be better to bag a bargain now!

PPS you can’t also write off the capital value of the car as your company hadn’t actually paid out that money. It’s either purchase cost or lease costs

Edited by Acm123 on Thursday 15th August 19:31


Edited by Acm123 on Thursday 15th August 19:41

oop north

1,592 posts

127 months

Thursday 15th August 2019
quotequote all
Acm123 if a medical practice you are self employed and not a company? If so then you can only claim business proportion of the costs as an expense and company car bik irrelevant. They should apply to charging cost at home also though. Er, I think!

Acm123

17 posts

56 months

Thursday 15th August 2019
quotequote all
Private practice through ltd company

oop north

1,592 posts

127 months

Thursday 15th August 2019
quotequote all
Ah, ok. That’s different then smile

Hobo

Original Poster:

5,755 posts

245 months

Thursday 15th August 2019
quotequote all
Think I'll go with the e-tron as electric through the company does seems no brainer, and prefer the audi to the Jag, Merc & Tesla.

The dealer did mention a '50' model that is due out soon, rather than the '55' which would like be around £80 per month cheaper on contract hire, but look at the specs on these the range doesnt look great.

Phleaser

114 posts

109 months

Friday 16th August 2019
quotequote all
This ad was showing up on my Linkedin feed.
Seems interesting for LTD companies...
Not available for personal contracts frown

https://www2.vwfsfleet.co.uk/audi_e-tron_August_20...

oop north

1,592 posts

127 months

Friday 16th August 2019
quotequote all
Phleaser said:
This ad was showing up on my Linkedin feed.
Seems interesting for LTD companies...
Not available for personal contracts frown

https://www2.vwfsfleet.co.uk/audi_e-tron_August_20...
Not seriously interested but I wonder how much effect adding miles has in the cost - at least that’s 10k miles

Will be interesting to see how things go with more competition - when I ordered my iPace last November it was that or nothing (was not interested in Tesla at the time as the prices were ridiculous). I would not have an etron either (range fairly terrible) but next year’s polestar looks interesting and in 2.5 years there should lots of choice and competition!

Hobo

Original Poster:

5,755 posts

245 months

Friday 16th August 2019
quotequote all
Phleaser said:
This ad was showing up on my Linkedin feed.
Seems interesting for LTD companies...
Not available for personal contracts frown

https://www2.vwfsfleet.co.uk/audi_e-tron_August_20...
Hmmm. does look a decent deal.

I've hot the Audi guys doing me a quote for 9+35, 10000 miles per annum so will post up what they come back with.

Guffy

2,310 posts

264 months

Friday 16th August 2019
quotequote all
oop north said:
Guffy said:
I don't believe you can claim the electric trough your business if the vehicle is also for personal use.
Incorrect
Yes, that was poorly worded, my accountant informed me that you can't claim personal miles, whereas i have a truck through my limited company and all my fuel costs go through my company, regardless if personal or business.

oop north

1,592 posts

127 months

Friday 16th August 2019
quotequote all
Guffy said:
Yes, that was poorly worded, my accountant informed me that you can't claim personal miles, whereas i have a truck through my limited company and all my fuel costs go through my company, regardless if personal or business.
My answer was a bit terse, sorry! Was in middle of something. What I should have said is (1) the entire cost of charging an EV run through a company is deductible as a business expense (2) the user of the EV doesn’t have to pay any tax on charging or the vehicle provided by the employer - this has always been the case as electricity is not counted as “fuel” by HMRC (3) the user can (since 1 September 2018) charge the business 4p per mile for business miles even where the business pays for all the charging. I was told this on a tax course where the lecturer had confirmed this point specifically with someone senior at HMRC / the Treasury. And I asked him twice to make sure that this was the case even where the employer paid for all charging

This is a confusing and difficult area though as the position is different if it is (1) a company EV (2) privately owned EV where employer payment for charging at place of work is not taxable but payment for charging elsewhere is (unless purely for business)