Buying an EV via a Ltd company
Discussion
996c2 said:
Thanks everyone for the prompt and informative replies.
The situation seems to be as I thought and is definitely worth looking into further between now and April 2020.
The 2% BIK figure is unlikely to last for very long as it's very easy generous. I guess they will have to give us the figure for 2021/2022 by April 2020 so will help make up my mind.
I would hope we'll have at least another year added in the Autumn '19 budget. The timing will be just right for business owners to get into cars for April '20 for 2 years or possibly more of incredibly cheap motoring. This'll be a good way to bring more EVs into circulation once all those lease cars hit the market.The situation seems to be as I thought and is definitely worth looking into further between now and April 2020.
The 2% BIK figure is unlikely to last for very long as it's very easy generous. I guess they will have to give us the figure for 2021/2022 by April 2020 so will help make up my mind.
Can I please ask a. Similar question? I’m looking to buy a model 3 now through my company as a company car. As I understand it this means I get to reduce my profit by 100% of the car cost this year and then all other running costs are also through my company. I’ve also seen that I can charge my company for all charging that I do at home (I’d rather have a home charger than a workplace one) regardless of private mileage.
I think this is the best way to buy one, but if I’m missing something can someone please let know? I’ll then ask my accountant but I want to have some information first.
Thanks
Mark
I think this is the best way to buy one, but if I’m missing something can someone please let know? I’ll then ask my accountant but I want to have some information first.
Thanks
Mark
Bear in mind that the new benefit in kind rates don't start until April though, so your accountant will need to run the sums. Whether it's better to buy or lease will depend on a number of factors, both the overall cost of the car and your taxation based on your individual circumstances.
MaxFromage said:
Bear in mind that the new benefit in kind rates don't start until April though, so your accountant will need to run the sums. Whether it's better to buy or lease will depend on a number of factors, both the overall cost of the car and your taxation based on your individual circumstances.
Thanks. I realise the BIK is 16% now and then 2% in April, but I’ve sat in one now - I’ll pay a bit of tax 
MaxFromage said:
As long as the Model 3 is new, the full cost will reduce your profits for the year.
The company can only reimburse you for business miles traveled and not private as well. The current advisory rate is 4p per mile, but this can be varied if it can be shown costs are higher.
I thought that because electricity isn’t classed as a fuel there was no benefit and so if the company pays for all of the fuel it’s ok? I’ll check with my accountant as I’d rather charge at home and claim it all. The company can only reimburse you for business miles traveled and not private as well. The current advisory rate is 4p per mile, but this can be varied if it can be shown costs are higher.
That's correct, the company can pay for all of your fuel without a benefit in kind being incurred. This is because electricity is not currently classed as a fuel. However you can only be reimbursed for your business miles. Reimbursement for private miles would constitute income and would be taxable as employment earnings by the employer.
MaxFromage said:
That's correct, the company can pay for all of your fuel without a benefit in kind being incurred. This is because electricity is not currently classed as a fuel. However you can only be reimbursed for your business miles. Reimbursement for private miles would constitute income and would be taxable as employment earnings by the employer.
Let’s be precise about this:1. Company purchase car (or leases it)
2. All running costs including charging at home, at work and out and about can be paid by the company - and vat can be recovered in full on all those costs
3. 4p per mile can still be paid by the company on all business miles even where the company is covering the full charging costs
4. Bik tax based on 16% x list price at registration to 5 April 2020 and 2% thereafter
I have my iPace on contract hire - I get to claim half the vat back on the monthly payments. I think this is probably better than buying the car outright in the company - the first year write down is a cash flow benefit as when you sell you suffer corporation tax on the full proceeds
I'm afraid I don't agree with 2 or 3.
The company cannot reimburse home electricity costs relating to private mileage. If it does, it will be classed as income.
The 4p per mile relates to reimbursing business miles paid privately. The employee cannot claim for something s/he hasn't paid for.
https://www.accountingweb.co.uk/tax/hmrc-policy/hm...
The company cannot reimburse home electricity costs relating to private mileage. If it does, it will be classed as income.
The 4p per mile relates to reimbursing business miles paid privately. The employee cannot claim for something s/he hasn't paid for.
https://www.accountingweb.co.uk/tax/hmrc-policy/hm...
MaxFromage said:
I'm afraid I don't agree with 2 or 3.
The company cannot reimburse home electricity costs relating to private mileage. If it does, it will be classed as income.
The 4p per mile relates to reimbursing business miles paid privately. The employee cannot claim for something s/he hasn't paid for.
https://www.accountingweb.co.uk/tax/hmrc-policy/hm...
A leading tax lecturer disagrees with you - I specifically asked those questions ....The company cannot reimburse home electricity costs relating to private mileage. If it does, it will be classed as income.
The 4p per mile relates to reimbursing business miles paid privately. The employee cannot claim for something s/he hasn't paid for.
https://www.accountingweb.co.uk/tax/hmrc-policy/hm...
That's shockingly bad for a lecturer. Here's the info from the Association of Taxation Technicians.
Electric car taxation for employees and businesses
Recent years have seen a remarkable increase in the popularity of electric cars. As at December 2017 more than 132,000 ‘plug-in’ cars (see below) had been registered in the UK, up from 3,500 in 2013.
There are broadly three types of car currently available in the UK which have some form of electric propulsion:
‘Pure-electric’ cars – ‘plug-in’ cars with electric propulsion systems only and no petrol or diesel engine.
Hybrid cars – cars which combine a conventional petrol / diesel engine with an electric propulsion system. These can be sub-divided into two types:
‘Plug-in’ hybrids that can be recharged by plugging into an external source of electricity.
‘Conventional’ hybrids that cannot be recharged by plugging into an external electricity source - instead the electric battery is recharged by the engine or through regenerative braking.
This article refers to all of the above collectively as electric cars.
To further encourage the take up of low and zero emissions vehicles (including electric cars) a range of special tax measures have been introduced. This article focuses on two specific areas:
the employment tax implications of electric cars;
the capital allowances available to businesses.
It does not consider Vehicle Excise Duty, electric vans or the ‘plug-in grants’ which can reduce the cost of electric vehicles.
Employment taxes
Whether a taxable benefit arises in connection with an electric car and how this is calculated depends on whether it is a company car or is personally owned by the employee.
Company cars
If an employer provides an electric car to their employee a taxable benefit in kind will arise. The value of this is calculated in the same way as for other company cars1, with the following differences for Pure-electric cars:
The lower appropriate percentages for zero-emissions vehicles will apply.
The list price must include the cost of the battery, even if this is leased separately. HMRC’s position is that as the car cannot move without a battery it is integral to the car.
The changes to the taxation of employee benefits from 6 April 2017 which largely removed the income tax and employer NIC advantages of optional remuneration arrangements such as salary sacrifice (see here) do not apply to ultra-low emissions vehicles. These are defined as vehicles which emit 50g/km CO2 or less in 2018-19 (75g/km or less in 2017-18), which will include all Pure-electric cars and some Plug-in and Conventional hybrids. Employers may therefore still find it attractive to provide such ultra-low emission electric cars under salary sacrifice arrangements.
Tax law does not treat electricity as a fuel. As a result, for Pure-electric cars:
The fuel benefit charge in s149 ITEPA 2003 does not apply to any electricity supplied by an employer - no benefit in kind arises if an employer pays to charge a Pure-electric company car (e.g. the car is charged at work), regardless of the level of private mileage.
Up until 1 September 2018, Advisory Fuel Rates (AFRs)2 could not be used to reimburse employees for the cost of electricity paid for personally but used for business travel.
HMRC have however announced that, from 1 September 2018, a new AFR of 4 pence per mile will apply for fully electric company cars.
The new rate means that HMRC will now accept that payments to employees of up to 4 pence per mile for business travel in a fully electric company car will not result in a taxable benefit in kind. The situation for hybrid company cars has not changed, and remains as set out below.
Employers can choose to use a different rate if, for example, their cars are more efficient, or they can show that the cost of business travel is higher. However, if they pay more than the AFR and cannot demonstrate a higher electricity cost per mile, any excess will be a taxable benefit in kind.
The lack of AFRs for Pure-electric company cars up to 1 September 2018 made the situation for reimbursing employees for business mileage more complicated. Prior to the introduction of the AFR, where an employee charged a Pure-electric company car:
If their employer reimbursed them for the cost of the electricity, the tax treatment depended on the use of the car:
Business use only – the s289A ITEPA 2003 exemption for paid or reimbursed expenses would exempt the amount received.
Personal or mixed use - the reimbursement was taxable as earnings, with the employee entitled to a deduction for the cost of business miles travelled.
If their employer did not reimburse them, they are entitled to a deduction under s337/s338 ITEPA 2003 for the actual electricity cost of business miles travelled.
This raised the practical difficulty of identifying the cost of the electricity used during business miles travelled. This may have been more straightforward where a commercial charging point was used, but could be difficult to establish where a company car was charged at home. This practical difficulty has been resolved by the introduction of an AFR rate for Pure-electric cars from 1 September 2018.
Whilst excluding electricity from the definition of fuel did previously cause administrative problems regarding the reimbursement of business mileage, there are some benefits. In particular, s149(4) ITEPA 2003 extends the exclusion from the car fuel charge to any ‘facility or means for supplying electrical energy’. This means that an employer can, for example, pay for the following without a taxable benefit arising:
A vehicle charging point to be installed at the employee’s home.
A charge card to allow individuals access to commercial or local authority charging points.
It should be noted that the above points only apply to Pure-electric cars.
By contrast, Plug-in and Conventional hybrids are subject to:
normal fuel benefit rules and
the normal application of diesel / petrol AFRs - both in relation to an employer’s reimbursement for business travel where the cost of fuel was incurred personally and in relation to an employee’s repayment to an employer for private travel where the cost of fuel was borne by the employer.
Electric car taxation for employees and businesses
Recent years have seen a remarkable increase in the popularity of electric cars. As at December 2017 more than 132,000 ‘plug-in’ cars (see below) had been registered in the UK, up from 3,500 in 2013.
There are broadly three types of car currently available in the UK which have some form of electric propulsion:
‘Pure-electric’ cars – ‘plug-in’ cars with electric propulsion systems only and no petrol or diesel engine.
Hybrid cars – cars which combine a conventional petrol / diesel engine with an electric propulsion system. These can be sub-divided into two types:
‘Plug-in’ hybrids that can be recharged by plugging into an external source of electricity.
‘Conventional’ hybrids that cannot be recharged by plugging into an external electricity source - instead the electric battery is recharged by the engine or through regenerative braking.
This article refers to all of the above collectively as electric cars.
To further encourage the take up of low and zero emissions vehicles (including electric cars) a range of special tax measures have been introduced. This article focuses on two specific areas:
the employment tax implications of electric cars;
the capital allowances available to businesses.
It does not consider Vehicle Excise Duty, electric vans or the ‘plug-in grants’ which can reduce the cost of electric vehicles.
Employment taxes
Whether a taxable benefit arises in connection with an electric car and how this is calculated depends on whether it is a company car or is personally owned by the employee.
Company cars
If an employer provides an electric car to their employee a taxable benefit in kind will arise. The value of this is calculated in the same way as for other company cars1, with the following differences for Pure-electric cars:
The lower appropriate percentages for zero-emissions vehicles will apply.
The list price must include the cost of the battery, even if this is leased separately. HMRC’s position is that as the car cannot move without a battery it is integral to the car.
The changes to the taxation of employee benefits from 6 April 2017 which largely removed the income tax and employer NIC advantages of optional remuneration arrangements such as salary sacrifice (see here) do not apply to ultra-low emissions vehicles. These are defined as vehicles which emit 50g/km CO2 or less in 2018-19 (75g/km or less in 2017-18), which will include all Pure-electric cars and some Plug-in and Conventional hybrids. Employers may therefore still find it attractive to provide such ultra-low emission electric cars under salary sacrifice arrangements.
Tax law does not treat electricity as a fuel. As a result, for Pure-electric cars:
The fuel benefit charge in s149 ITEPA 2003 does not apply to any electricity supplied by an employer - no benefit in kind arises if an employer pays to charge a Pure-electric company car (e.g. the car is charged at work), regardless of the level of private mileage.
Up until 1 September 2018, Advisory Fuel Rates (AFRs)2 could not be used to reimburse employees for the cost of electricity paid for personally but used for business travel.
HMRC have however announced that, from 1 September 2018, a new AFR of 4 pence per mile will apply for fully electric company cars.
The new rate means that HMRC will now accept that payments to employees of up to 4 pence per mile for business travel in a fully electric company car will not result in a taxable benefit in kind. The situation for hybrid company cars has not changed, and remains as set out below.
Employers can choose to use a different rate if, for example, their cars are more efficient, or they can show that the cost of business travel is higher. However, if they pay more than the AFR and cannot demonstrate a higher electricity cost per mile, any excess will be a taxable benefit in kind.
The lack of AFRs for Pure-electric company cars up to 1 September 2018 made the situation for reimbursing employees for business mileage more complicated. Prior to the introduction of the AFR, where an employee charged a Pure-electric company car:
If their employer reimbursed them for the cost of the electricity, the tax treatment depended on the use of the car:
Business use only – the s289A ITEPA 2003 exemption for paid or reimbursed expenses would exempt the amount received.
Personal or mixed use - the reimbursement was taxable as earnings, with the employee entitled to a deduction for the cost of business miles travelled.
If their employer did not reimburse them, they are entitled to a deduction under s337/s338 ITEPA 2003 for the actual electricity cost of business miles travelled.
This raised the practical difficulty of identifying the cost of the electricity used during business miles travelled. This may have been more straightforward where a commercial charging point was used, but could be difficult to establish where a company car was charged at home. This practical difficulty has been resolved by the introduction of an AFR rate for Pure-electric cars from 1 September 2018.
Whilst excluding electricity from the definition of fuel did previously cause administrative problems regarding the reimbursement of business mileage, there are some benefits. In particular, s149(4) ITEPA 2003 extends the exclusion from the car fuel charge to any ‘facility or means for supplying electrical energy’. This means that an employer can, for example, pay for the following without a taxable benefit arising:
A vehicle charging point to be installed at the employee’s home.
A charge card to allow individuals access to commercial or local authority charging points.
It should be noted that the above points only apply to Pure-electric cars.
By contrast, Plug-in and Conventional hybrids are subject to:
normal fuel benefit rules and
the normal application of diesel / petrol AFRs - both in relation to an employer’s reimbursement for business travel where the cost of fuel was incurred personally and in relation to an employee’s repayment to an employer for private travel where the cost of fuel was borne by the employer.
oop north said:
Let’s be precise about this:
1. Company purchase car (or leases it)
2. All running costs including charging at home, at work and out and about can be paid by the company - and vat can be recovered in full on all those costs
3. 4p per mile can still be paid by the company on all business miles even where the company is covering the full charging costs
4. Bik tax based on 16% x list price at registration to 5 April 2020 and 2% thereafter
I have my iPace on contract hire - I get to claim half the vat back on the monthly payments. I think this is probably better than buying the car outright in the company - the first year write down is a cash flow benefit as when you sell you suffer corporation tax on the full proceeds
Thanks, that’s as I understood it but I will her my accountant to check. I’m planning to keep it for several years so by the time I buy it from the company the value will be very low. 1. Company purchase car (or leases it)
2. All running costs including charging at home, at work and out and about can be paid by the company - and vat can be recovered in full on all those costs
3. 4p per mile can still be paid by the company on all business miles even where the company is covering the full charging costs
4. Bik tax based on 16% x list price at registration to 5 April 2020 and 2% thereafter
I have my iPace on contract hire - I get to claim half the vat back on the monthly payments. I think this is probably better than buying the car outright in the company - the first year write down is a cash flow benefit as when you sell you suffer corporation tax on the full proceeds
I see there are some contradictory opinions, so I’ll keep an eye on the discussion.
Thanks all.
Please do speak to your accountant for clarity. I've been dealing with vehicle related taxation for over twenty years. We often see conflicting information when new rules take over from a stop-gap scenario such as those with electric cars.
HMRC:
https://www.gov.uk/tax-relief-for-employees/vehicl...
'Using a company car for business
You can claim tax relief on the money you’ve spent on fuel and electricity, for business trips in your company car. Keep records to show the actual cost of the fuel.'
Further to this, you can use the HMRC status checker:
https://www.gov.uk/expenses-and-benefits-electric-...
You cannot claim for personal electricity use or claim the 4p if the company is charging the car. The latter would be fraudulent.
The interesting question is how HMRC deal with the situation where the company has a direct contract with a charging point provider who have installed a point at your home. Current legislation would suggest that all fuel used by you is allowable as a company expense and you would have no liability in any way. I understand some installers can provide this?
HMRC:
https://www.gov.uk/tax-relief-for-employees/vehicl...
'Using a company car for business
You can claim tax relief on the money you’ve spent on fuel and electricity, for business trips in your company car. Keep records to show the actual cost of the fuel.'
Further to this, you can use the HMRC status checker:
https://www.gov.uk/expenses-and-benefits-electric-...
You cannot claim for personal electricity use or claim the 4p if the company is charging the car. The latter would be fraudulent.
The interesting question is how HMRC deal with the situation where the company has a direct contract with a charging point provider who have installed a point at your home. Current legislation would suggest that all fuel used by you is allowable as a company expense and you would have no liability in any way. I understand some installers can provide this?
MaxFromage said:
Please do speak to your accountant for clarity. I've been dealing with vehicle related taxation for over twenty years. We often see conflicting information when new rules take over from a stop-gap scenario such as those with electric cars.
HMRC:
https://www.gov.uk/tax-relief-for-employees/vehicl...
'Using a company car for business
You can claim tax relief on the money you’ve spent on fuel and electricity, for business trips in your company car. Keep records to show the actual cost of the fuel.'
Further to this, you can use the HMRC status checker:
https://www.gov.uk/expenses-and-benefits-electric-...
You cannot claim for personal electricity use or claim the 4p if the company is charging the car. The latter would be fraudulent.
The interesting question is how HMRC deal with the situation where the company has a direct contract with a charging point provider who have installed a point at your home. Current legislation would suggest that all fuel used by you is allowable as a company expense and you would have no liability in any way. I understand some installers can provide this?
Thanks, I will do. That makes sense re: claiming 4p if the company is charging. If I can have the company install the charger (at home) and claim all charging related electricity I’d be happy with that, but it looks like I’d need to have a separate contract for the power to the home charge point. HMRC:
https://www.gov.uk/tax-relief-for-employees/vehicl...
'Using a company car for business
You can claim tax relief on the money you’ve spent on fuel and electricity, for business trips in your company car. Keep records to show the actual cost of the fuel.'
Further to this, you can use the HMRC status checker:
https://www.gov.uk/expenses-and-benefits-electric-...
You cannot claim for personal electricity use or claim the 4p if the company is charging the car. The latter would be fraudulent.
The interesting question is how HMRC deal with the situation where the company has a direct contract with a charging point provider who have installed a point at your home. Current legislation would suggest that all fuel used by you is allowable as a company expense and you would have no liability in any way. I understand some installers can provide this?
Edited by MrMajic on Saturday 4th May 23:59
MaxFromage said:
I'm afraid I don't agree with 2 or 3.
The company cannot reimburse home electricity costs relating to private mileage. If it does, it will be classed as income.
The 4p per mile relates to reimbursing business miles paid privately. The employee cannot claim for something s/he hasn't paid for.
https://www.accountingweb.co.uk/tax/hmrc-policy/hm...
Thanks for the really useful answers on this topic.The company cannot reimburse home electricity costs relating to private mileage. If it does, it will be classed as income.
The 4p per mile relates to reimbursing business miles paid privately. The employee cannot claim for something s/he hasn't paid for.
https://www.accountingweb.co.uk/tax/hmrc-policy/hm...
Can I ask if you can clarify who would be responsible for insurance cost if the car is mainly for personal use? Thanks
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