BIK and purchase vs lease
Discussion
Hi all,
With the reduced BIK next year and the expansion in EV options I'm looking at acquiring an EV next year via my limited company. I wanted to see what the collective wisdom is on the below.
If we assume a £100k fully electric EV - Tesla or Taycan for example.
I think, if the limited company buys the car outright then I get £100k offset against my corporation tax, with no BIK next year and a small amount the year after. When I sell the car the sale price (say £50K) goes back into the accounts with the net effect being £50k set against corporation tax. If I'm right that's simple enough.
On the other hand, how would it work if I lease the car at say £1k per month over three years, with maybe £15k down. Does that give me £27k against corporation tax in the first year and then £12k per year for the rest of the term? And then what happens at the end of the term?
If the leasing costs are offset on a when incurred basis that has to be the better option as no large purchase price or additional corporation tax in a few years. Or, have I got it all wrong!
With the reduced BIK next year and the expansion in EV options I'm looking at acquiring an EV next year via my limited company. I wanted to see what the collective wisdom is on the below.
If we assume a £100k fully electric EV - Tesla or Taycan for example.
I think, if the limited company buys the car outright then I get £100k offset against my corporation tax, with no BIK next year and a small amount the year after. When I sell the car the sale price (say £50K) goes back into the accounts with the net effect being £50k set against corporation tax. If I'm right that's simple enough.
On the other hand, how would it work if I lease the car at say £1k per month over three years, with maybe £15k down. Does that give me £27k against corporation tax in the first year and then £12k per year for the rest of the term? And then what happens at the end of the term?
If the leasing costs are offset on a when incurred basis that has to be the better option as no large purchase price or additional corporation tax in a few years. Or, have I got it all wrong!
The main financial disadvantage of having an EV as a company car is only being able to claim back 4p/mile for any business miles. For example, if you do 10k business miles pa, you can claim up to £4500, but only £400 for an EV. So this may make a personal lease/purchase more appealing to you, as you can still claim up to the full 45p.
Fastlane said:
The main financial disadvantage of having an EV as a company car is only being able to claim back 4p/mile for any business miles. For example, if you do 10k business miles pa, you can claim up to £4500, but only £400 for an EV. So this may make a personal lease/purchase more appealing to you, as you can still claim up to the full 45p.
Cant see that being better than drawing £1000 per month at 38% to pay for the thing?9005rpm said:
On the other hand, how would it work if I lease the car at say £1k per month over three years, with maybe £15k down. Does that give me £27k against corporation tax in the first year and then £12k per year for the rest of the term? And then what happens at the end of the term?
If the leasing costs are offset on a when incurred basis that has to be the better option as no large purchase price or additional corporation tax in a few years. Or, have I got it all wrong!
You could lease purchase (business PCP, effectively) and you’d offset the full 100k against profits in the first year, even if you’ve only paid the deposit and first years payments - it falls under capital allowances. Nice shifting the tax saving into year one, albeit still liable for the balancing charges on disposal.If the leasing costs are offset on a when incurred basis that has to be the better option as no large purchase price or additional corporation tax in a few years. Or, have I got it all wrong!
The benefit of the buy it outright and get corporation tax relief up front approach is overstated in my view - it just accelerates tax relief. But you cannot claim any VAT relief.
With Contract hire you can reclaim 50% of the vat which gives an 8.33% discount on the total cost.
So if the borrowing cost is the same on either approach, I think contract hire is better. But if you have cash lying around doing nothing then there may be some saving from outright purchase.
And outright purchase does give you more flexibility than contract hire as you aren’t tied to a fixed end date
With Contract hire you can reclaim 50% of the vat which gives an 8.33% discount on the total cost.
So if the borrowing cost is the same on either approach, I think contract hire is better. But if you have cash lying around doing nothing then there may be some saving from outright purchase.
And outright purchase does give you more flexibility than contract hire as you aren’t tied to a fixed end date
Fastlane said:
The main financial disadvantage of having an EV as a company car is only being able to claim back 4p/mile for any business miles. For example, if you do 10k business miles pa, you can claim up to £4500, but only £400 for an EV. So this may make a personal lease/purchase more appealing to you, as you can still claim up to the full 45p.
That's wrong.https://www.gov.uk/government/publications/advisor...
You're confusing AFR with MAP.
[quote=Evanivitch]
That's wrong.
https://www.gov.uk/government/publications/advisor...
You're confusing AFR with MAP.[/quot
This has been done so death on various forums and if is very clear that you can only claim 4p per mile for a company EV. For a personally owned or leased EV you can claim up to 45p.
That's wrong.
https://www.gov.uk/government/publications/advisor...
You're confusing AFR with MAP.[/quot
This has been done so death on various forums and if is very clear that you can only claim 4p per mile for a company EV. For a personally owned or leased EV you can claim up to 45p.
Fastlane said:
Evanivitch said:
That's wrong.
https://www.gov.uk/government/publications/advisor...
You're confusing AFR with MAP.[/quot
This has been done so death on various forums and if is very clear that you can only claim 4p per mile for a company EV. For a personally owned or leased EV you can claim up to 45p.
My mistake, skimmed past where he was comparing a company EV with a private ICE.https://www.gov.uk/government/publications/advisor...
You're confusing AFR with MAP.[/quot
This has been done so death on various forums and if is very clear that you can only claim 4p per mile for a company EV. For a personally owned or leased EV you can claim up to 45p.
oop north said:
With Contract hire you can reclaim 50% of the vat which gives an 8.33% discount on the total cost.
And 100% of the hire payments. That's worth remembering, too. Insurance can be a bit cheaper also.I guess it comes down to "Am I likely to want to keep the vehicle".
With a PCP you have the option to buy the car, or get out of the contract at anytime and that's usually worth a few quid to keep your options open and manage the risk of under/over-buying. With CH you're pretty much stuck to go full-term but never beyond that.
Fastlane said:
The main financial disadvantage of having an EV as a company car is only being able to claim back 4p/mile for any business miles. For example, if you do 10k business miles pa, you can claim up to £4500, but only £400 for an EV. So this may make a personal lease/purchase more appealing to you, as you can still claim up to the full 45p.
presumably,If you lease an EV through the company and use it for you private miles, you an still use your other combustion engine car for business miles and charge the company the 45p/mile for that?
lawtoni said:
presumably,
If you lease an EV through the company and use it for you private miles, you an still use your other combustion engine car for business miles and charge the company the 45p/mile for that?
That's an interesting question. As an employee then if you have a company car then an employer would expect you to use that for business mileage, unless of course you can find a cheaper option (like public transport). If you lease an EV through the company and use it for you private miles, you an still use your other combustion engine car for business miles and charge the company the 45p/mile for that?
If it is your own company, I don't think HMRC would look kindly on you having a company car and then choosing to use your private car for business mileage, but it's an interesting idea. Anyone else any thoughts on this?
lost in espace said:
I don't see why you can't claim for both. You are entitled. A company car is effectively a perk.
This would be marvelous!cake and eating it!
Very rare for business owners to get something back these days and reverses some of the changes that have made our lives more expensive of late!
Thank you all for the input here.
I'm not worried about whether I can claim 4p or 45p per mile as expenses as I hardly do any business miles. It's basically a perk and if I can run that via my Ltd company, then all the better.
I really want a Taycan but have been told today that I'll be lucky to get one by the end of 2020. So, I may get a Tesla X instead.
So, if lease costs is £63k over four years, it sounds like I have no BIK next year, then a little in the following years. Otherwise the costs are all offset against corp tax and pre income tax. So, either spend £63k of the company's money or pull it out at 38% which gives me c.£40k to spend, less the corp tax saving. I think...
Appreciate the comments.
I'm not worried about whether I can claim 4p or 45p per mile as expenses as I hardly do any business miles. It's basically a perk and if I can run that via my Ltd company, then all the better.
I really want a Taycan but have been told today that I'll be lucky to get one by the end of 2020. So, I may get a Tesla X instead.
So, if lease costs is £63k over four years, it sounds like I have no BIK next year, then a little in the following years. Otherwise the costs are all offset against corp tax and pre income tax. So, either spend £63k of the company's money or pull it out at 38% which gives me c.£40k to spend, less the corp tax saving. I think...
Appreciate the comments.
Sorry to bring back an old thread but this is something that I’m looking into.
I currently have a LTD company but the car I use for work is a BMW that I claim the 45/25p per mile.
I’ve always liked the Taycan and recently spoke with someone who had bought one under the AIA scheme and a lease purchase.
I’ve never heard of either of these but could someone explain the option available.
I’ve been Googling for the past 48 hours and my understanding is that I can claim 19% of the value through my corporation tax and half of the vat so 10%. Is this correct?
I currently have a LTD company but the car I use for work is a BMW that I claim the 45/25p per mile.
I’ve always liked the Taycan and recently spoke with someone who had bought one under the AIA scheme and a lease purchase.
I’ve never heard of either of these but could someone explain the option available.
I’ve been Googling for the past 48 hours and my understanding is that I can claim 19% of the value through my corporation tax and half of the vat so 10%. Is this correct?
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