BEV company car

[Shaoxter]

I run a limited company and have been looking to get an EV for a while. The new BIK rules from April 2020 look almost too good to be true, so just want to make sure I have done the sums correctly

Let's say I buy a Tesla Model 3 for £36k:
- I can offset 100% of the purchase price against the profits of my company, so a corporation tax saving of £6,840 (36k x 19%)
- There is no personal tax or NI to pay for the 20/21 tax year. For the 21/22 tax year, the BIK value is £360 so any tax or NI on that is immaterial.

Is this correct? Does it matter if I get an older BEV or is this or new cars only?

Also what happens if I sell the car? Does the first year allowance get reversed?

[red_slr]

Don't forget depreciation.

[grahamm]

I believe if you get 100% capital allowance when you buy the vehicle any proceeds when sold will be taxable profits within your company

[Heres Johnny]

grahamm said:

I believe if you get 100% capital allowance when you buy the vehicle any proceeds when sold will be taxable profits within your company

Correct.

The 100% FYA is nothing more than a cash flow benefit on depreciation, ie over the life of the car you can only offset the depreciation against tax. You can also offset other costs like servicing, tyres, insurance etc

The downside to an EV as a company car is the move to the approved mileage rates. If you do business mileage in a privately owned car you can claim 45p for the first 10k miles or so, in a pure EV its 4p a mile. If you do a lot of mileage that starts to tell, 10k business miles is £4.5k tax free out the busness (although you have to subtract the cost of fuel) v £400 for the EV, but thats about the only downside.

[Heres Johnny]

Shaoxter said:

Is this correct? Does it matter if I get an older BEV or is this or new cars only?

You can also only claim the 100% FYA on new cars (or preregistered cars by the manufacturer). You can still claim depreciation although its a different annual % for allowances but you end up in the same place over time - ie on a new car you can claim tax relief on the whole value of the car, in subsequent years you get no relief, and when you sell you pay tax on the sale price (which has to be a fair market valuation). On a used car or less up front loaded tax approach, you'd just take tax relief on a chunk of the cars value each year until its sold with a balancing amount at the end depending on your annual allowances being slightly better or worse than the true depreciation.

[Shaoxter]

Heres Johnny said:

Shaoxter said:

Is this correct? Does it matter if I get an older BEV or is this or new cars only?

You can also only claim the 100% FYA on new cars (or preregistered cars by the manufacturer). You can still claim depreciation although its a different annual % for allowances but you end up in the same place over time - ie on a new car you can claim tax relief on the whole value of the car, in subsequent years you get no relief, and when you sell you pay tax on the sale price (which has to be a fair market valuation). On a used car or less up front loaded tax approach, you'd just take tax relief on a chunk of the cars value each year until its sold with a balancing amount at the end depending on your annual allowances being slightly better or worse than the true depreciation.

Ok that makes sense thanks!

[mfmman]

Heres Johnny said:

The downside to an EV as a company car is the move to the approved mileage rates. If you do business mileage in a privately owned car you can claim 45p for the first 10k miles or so, in a pure EV its 4p a mile. If you do a lot of mileage that starts to tell, 10k business miles is £4.5k tax free out the busness (although you have to subtract the cost of fuel) v £400 for the EV, but thats about the only downside.

That's not relevant though is it, if its a company car then the AMAP rates don't apply do they?

[Heres Johnny]

mfmman said:

Heres Johnny said:

The downside to an EV as a company car is the move to the approved mileage rates. If you do business mileage in a privately owned car you can claim 45p for the first 10k miles or so, in a pure EV its 4p a mile. If you do a lot of mileage that starts to tell, 10k business miles is £4.5k tax free out the busness (although you have to subtract the cost of fuel) v £400 for the EV, but thats about the only downside.

That's not relevant though is it, if its a company car then the AMAP rates don't apply do they?

If its a company car you use AFR which for a BEV is 4p (they actually call it a AER because the HMRC can't get their head around elecricity being a fuel)
If its a private car you use AMAP which is 45p for the first 10k then 25p

Not sure why it doesn't apply - they're just different rates depending on whether its a company car or a private car. I'm highlighting that if you did a lot of business mileage, as a private car you'd claim significantly more than as a company car through mileage

Edited by Heres Johnny on Wednesday 28th August 12:14

[mfmman]

It was more the linking of AMAP rates and '4.5k out of the business tax free' to a post about company cars.

I'm only on the employee side of the fence here so don't know the rules from a company perspective but I have seen people get all upset when they get a mileage rate lower than 45p per mile for fuel for their company car as if they think AMAP applies to them (or a tax bill if they do get paid that)

I'm sure you knew exactly what you were stating but they way it was worded was a little confusing (IMHO)

[Tiggsy]

it's looking a cheap way to run a nice car. I'm ordering a Tesla S Performance for April and the cost over the junk V60 Volvo I lease privately is not that great!

[loafer123]

Is it also right that if you are a partner in an LLP, that full tax deduction in the first year goes against your taxable earnings?

[MOBB]

I’m about to lease a Jaguar ipace through my company

Very good business lease deals about at the moment, plus no bik next year, has to be taken advantage of

[Heres Johnny]

loafer123 said:

Is it also right that if you are a partner in an LLP, that full tax deduction in the first year goes against your taxable earnings?

I believe it’s different, I’m not fully aware of the finer detail but I think in that scenario you only charge a proportion to the partnership based on the split of business/personal miles. I could easily be wrong but I’d not assume the rules are the same

[oop north]

Heres Johnny said:

I believe it’s different, I’m not fully aware of the finer detail but I think in that scenario you only charge a proportion to the partnership based on the split of business/personal miles. I could easily be wrong but I’d not assume the rules are the same

I am not sure 100% on LLP taxation - assuming it’s just like a regular partnership then you can only claim the business proportion, so EV nowhere near as good (from next April anyway) through partnership as company

[loafer123]

oop north said:

Heres Johnny said:

I believe it’s different, I’m not fully aware of the finer detail but I think in that scenario you only charge a proportion to the partnership based on the split of business/personal miles. I could easily be wrong but I’d not assume the rules are the same

I am not sure 100% on LLP taxation - assuming it’s just like a regular partnership then you can only claim the business proportion, so EV nowhere near as good (from next April anyway) through partnership as company

Thanks, both. I can choose my corporate structure, so I am interested in the detail.

I guess that the tax relief in a company is only the Corporation Tax rate, whereas the relief would be at my top Income Tax rate, so even if only half is business and deductible, it would still make sense?

[Tiggsy]

Although the LTD co relief is against corp tax, the money is no longer being draw from the business into the directors pocket the way it is for a personal lease/buy. So saving higher/additional rate.

[Heres Johnny]

Tiggsy said:

Although the LTD co relief is against corp tax, the money is no longer being draw from the business into the directors pocket the way it is for a personal lease/buy. So saving higher/additional rate.

Yes, corp tax before paying dividends, then you pay personal tax on the dividends (or take as increased salary)

[Tiggsy]

Heres Johnny said:

Tiggsy said:

Although the LTD co relief is against corp tax, the money is no longer being draw from the business into the directors pocket the way it is for a personal lease/buy. So saving higher/additional rate.

Yes, corp tax before paying dividends, then you pay personal tax on the dividends (or take as increased salary)

This - so to pay the lease on my lump of st V60 I have to pay Corp tax, then draw a div and pay additional rate div tax to hand over to Volvo (or BP as the junk T5 does 24mpg - somehow going against the laws of physics as it's slow as fk)

[Shaoxter]

Having done some reading and a test drive of an i3, I'm pretty keen to get into an EV now, not sure I can wait until April next year!

How do you go about getting the list price of a car when new if it's not a new car and the original invoice is unavailable? Is there somewhere you can plug in the reg and it tells you or is it just guesswork?

Also how does insurance work? I guess it's insured under the company name and you can name specific people in the company who will be driving it, but would you still be covered for personal use?

[MOBB]

One thing to bear in mind is the size/balance sheet of your limited company. I speak from very recent experience!!

I applied for an ipace business deal which was underwritten by Arval and they declined me (after waiting 3 days), stating “weak accounts”. My company is just me contracting so pretty small, but low risk credit rating.

Applied for a Tesla model 3 today which was underwritten by Leaseplan and all approved after 2 hours.

Might not apply if yours is a “proper” limited company :-)