EV as a company car - can it be used / demo for tax breaks
Discussion
Its currently set to be 2%, the gov haven;t yet put it into law and may well not with everything else going on. Its still pretty small
As long as the business is making profits then putting the car into the company will just reduce those profits by the costs associated with the car. If its a used car they will be servicing and repairs, tyres, and a capital allowance/depreciation which is 18% of the value. The company really needs to make enough profit to cover these costs.
So lets say you buy a 50k used EV which listed at 75k when new, depreciation in the year is 9k (18% of 50k), running costs etc might be 2k, total cost to the company will be 11k, as a cost this reduces the profits by that amount saying you corporation take and presumably dividences will be equally reduced saving you personal tax. If the BIK rate is 2% then the tax man will deem you to have had a benefit (income in another form) of £1,500 and tax you accordingly.
These figures may change a little and if you sold the car nad it depreciated more or less than the figures above then the company profits would adjust accordingly in the year it was sold - ie if you sold it at the end of the year, the 50k assety had been depreciated to 41k, if you sold it for 42k the company will have made a £1k profit on the transaction.
One thing to note is if you do a lot of business miles and are used to claiming 45p a mile. If you have an EV as a company car, that rate drops to 4p a mile.
As long as the business is making profits then putting the car into the company will just reduce those profits by the costs associated with the car. If its a used car they will be servicing and repairs, tyres, and a capital allowance/depreciation which is 18% of the value. The company really needs to make enough profit to cover these costs.
So lets say you buy a 50k used EV which listed at 75k when new, depreciation in the year is 9k (18% of 50k), running costs etc might be 2k, total cost to the company will be 11k, as a cost this reduces the profits by that amount saying you corporation take and presumably dividences will be equally reduced saving you personal tax. If the BIK rate is 2% then the tax man will deem you to have had a benefit (income in another form) of £1,500 and tax you accordingly.
These figures may change a little and if you sold the car nad it depreciated more or less than the figures above then the company profits would adjust accordingly in the year it was sold - ie if you sold it at the end of the year, the 50k assety had been depreciated to 41k, if you sold it for 42k the company will have made a £1k profit on the transaction.
One thing to note is if you do a lot of business miles and are used to claiming 45p a mile. If you have an EV as a company car, that rate drops to 4p a mile.
Budget in a couple weeks. Nobody knows whether they’ll happen, a lot has happened since they were suggested, eg an election, Brexit, cronovirus.. I imagine they will but they may take the view that 16% down to 2% and exemption from the salary sacrifice rules of being the higher of the true cost and the BiK rate for EVs is still very good.
Trailhead said:
oop north said:
I think on ex dem you do but used you don’t
Ex demo and used are the same thing. And you don’t. It’s only on new. https://www.gov.uk/hmrc-internal-manuals/capital-a...
Heres Johnny said:
Trailhead said:
oop north said:
I think on ex dem you do but used you don’t
Ex demo and used are the same thing. And you don’t. It’s only on new. https://www.gov.uk/hmrc-internal-manuals/capital-a...
Butter Face said:
Heres Johnny said:
Trailhead said:
oop north said:
I think on ex dem you do but used you don’t
Ex demo and used are the same thing. And you don’t. It’s only on new. https://www.gov.uk/hmrc-internal-manuals/capital-a...
As an example - Tesla are selling this one with 5k miles as a New car for these purposes
https://www.tesla.com/en_GB/new/5YJSB7E29KF312389?...
I’d respectfully disagree. The wording is very clear in ‘driven a limited number of miles’ how many miles is that? 100,200,2000,10000? I have demonstrators still on fleet that are 18m old and done 8k, is that still ‘unused and not second hand’
It’s incredibly ambiguous, as is much of this type of stuff. The likelihood of HMRC actually hammering you for buying an ex-demo is probably pretty small, but they keep it ambiguous so they have to leeway to nail someone for it when they feel like it.
For the motor trade I would say most would consider <250 miles as delivery miles and therefore ‘new and unused’
As an aside, I can’t see where that Tesla is marketed as ‘new’ anywhere on that page? Tesla give 4 years warranty on used cars bought from them but it’s not ‘new and unused’ (I am looking at the advert on mobile though)
It’s incredibly ambiguous, as is much of this type of stuff. The likelihood of HMRC actually hammering you for buying an ex-demo is probably pretty small, but they keep it ambiguous so they have to leeway to nail someone for it when they feel like it.
For the motor trade I would say most would consider <250 miles as delivery miles and therefore ‘new and unused’
As an aside, I can’t see where that Tesla is marketed as ‘new’ anywhere on that page? Tesla give 4 years warranty on used cars bought from them but it’s not ‘new and unused’ (I am looking at the advert on mobile though)
Edited by Butter Face on Sunday 8th March 17:39
Butter Face said:
I’d respectfully disagree. The wording is very clear in ‘driven a limited number of miles’ how many miles is that? 100,200,2000,10000? I have demonstrators still on fleet that are 18m old and done 8k, is that still ‘unused and not second hand’
It’s incredibly ambiguous, as is much of this type of stuff. The likelihood of HMRC actually hammering you for buying an ex-demo is probably pretty small, but they keep it ambiguous so they have to leeway to nail someone for it when they feel like it.
For the motor trade I would say most would consider <250 miles as delivery miles and therefore ‘new and unused’
As an aside, I can’t see where that Tesla is marketed as ‘new’ anywhere on that page? Tesla give 4 years warranty on used cars bought from them but it’s not ‘new and unused’ (I am looking at the advert on mobile though)
I read it as:It’s incredibly ambiguous, as is much of this type of stuff. The likelihood of HMRC actually hammering you for buying an ex-demo is probably pretty small, but they keep it ambiguous so they have to leeway to nail someone for it when they feel like it.
For the motor trade I would say most would consider <250 miles as delivery miles and therefore ‘new and unused’
As an aside, I can’t see where that Tesla is marketed as ‘new’ anywhere on that page? Tesla give 4 years warranty on used cars bought from them but it’s not ‘new and unused’ (I am looking at the advert on mobile though)
Edited by Butter Face on Sunday 8th March 17:39
"You should accept a car is unused and not second hand even if it has been driven a limited number of miles for the purposes of testing, delivery, test driven by a potential purchaser,
or used as a demonstration car.."
As is the general concencous here
https://www.accountingweb.co.uk/any-answers/demons...
if you look at the Tesla URL the clue is in the word "New" whereas they use "Used" if the car is, erm.. used. They don't give free unlimited suopercharging on used.
But irrespective, the point was made that a demo car was a used car, and the accounting webn article certainly makes it clear that a car from the dealer is not a used car
So are you an accountant or just someone who likes to argue on the internet determining arbitary definitions?
Re the 100% Capital Allowance, you still have to write back the amount received for it when you come to change the car.
So if you were to buy, say, a used Tesla Model 3 - not many around, and currently holding their value very well and likely to continue to do so - the depreciation upon disposal should be low enough for it all to be claimable at that point. So not being able to claim 100% at purchase on a used EV ends up just being a timing issue and will make little overall financial difference to the company.
However the 0% BIK rate will be retrospective from 5th April, so any individuals opting for a used zero emission company car will be WAY better off thereafter.
So if you were to buy, say, a used Tesla Model 3 - not many around, and currently holding their value very well and likely to continue to do so - the depreciation upon disposal should be low enough for it all to be claimable at that point. So not being able to claim 100% at purchase on a used EV ends up just being a timing issue and will make little overall financial difference to the company.
However the 0% BIK rate will be retrospective from 5th April, so any individuals opting for a used zero emission company car will be WAY better off thereafter.
Butter Face said:
I’m just giving the motor trade view on what I would say the difference between a ‘new and unused’ car and a ‘used’ car is. Nothing more.
You interpret the rules one way, I interpret it a different way, Hence the aforementioned ‘ambiguity’
Looks like the motor trade's and HMRC's view differ on what is a new car then.You interpret the rules one way, I interpret it a different way, Hence the aforementioned ‘ambiguity’
It makes me wonder why HMRC didn't just say; to claim capital allowances you have to be the first registered owner. This would bring it in line with most (if not all) insurance policies (not GAP policies) when they cover providing a new car in the event it is written off/stolen in the first year of ownership.
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