Electric Company Car Advice

[nickoedwards]

Hi, I''m looking for some plain advice on the benefits of an electric company car. I'm a director of my own company and am playing with the idea of purchasing an electric company car through the business. I know that the BIK rates are much less than combustion engines, however, I've read that the purchase of an electric car can also help toward reducing corporation tax liability. Would someone be able to talk me through how it does that and what has to happen to achieve it? Thanks.

 

[WaveJumper]

I am no accountant and I am sure someone will be along to point you in the right direction but saying that my simple understanding is your company can claim capital allowances to gain relief for the cost of the vehicle, which in turn reduce the company's taxable profit

 

[WaveJumper]

Well there we go having just Googled it:

"If you decide that buying through your limited company is the right move for you, you could potentially claim capital allowances on the cost of buying the car. However, the fact that you would need to put the day-to-day running costs of the car through the company'saccounts means that the company's profit decreases"

Definite conversation to have with your accountant I think
https://www.gov.uk/capital-allowances/business-cars

 

[JEREMY HAWKE]

If your doing a lot of business miles an electric car might be a big disappointment.
It is to much agro just save some tax

 

[Darren_Ssc]

If your doing a lot of business miles an electric car might be a big disappointment.
It is to much agro just save some tax

I think there was an incentive, something like a 100% write-down in year one (anecdotally), that was exploited a lot by big companies? Not sure it is still the case, likely not?

Some BIK advantages also, but, like you say, would it be worth the bother?
https://www.mitsubishi-motors.co.uk/buy/finance/company-car-tax

 

[JEREMY HAWKE]

I think there was an incentive, something like a 100% write-down in year one (anecdotally), that was exploited a lot by big companies? Not sure it is still the case, likely not?

Some BIK advantages also, but, like you say, would it be worth the bother?
https://www.mitsubishi-motors.co.uk/buy/finance/company-car-tax

I talking from practical reasons but I'm always happy to give the OP a lift in my petrol German barge if I'm in the area

 

[pentel]

If your doing a lot of business miles an electric car might be a big disappointment.

Real life range can be as low as 60% of that quoted, similar to the real life fuel consumption of liquid fuelled vehicles.

You might want to investigate insurance costs as well.

 

[Ian J]

I'm always happy to give the OP a lift in my petrol German barge if I'm in the area

A German barge fuelled by petrol is quite a rarity as most run on the dirtier smellier stuff nowadays

 

[WaveJumper]

A German barge fuelled by petrol is quite a rarity as most run on the dirtier smellier stuff nowadays

It's probably a 6.0 litre AMG petrol driven G Wagon

 

[Ian J]

It's probably a 6.0 litre AMG petrol driven G Wagon

More likely a VW Polo

 

[MyAccountantOnline]

Hi, I''m looking for some plain advice on the benefits of an electric company car. I'm a director of my own company and am playing with the idea of purchasing an electric company car through the business. I know that the BIK rates are much less than combustion engines, however, I've read that the purchase of an electric car can also help toward reducing corporation tax liability. Would someone be able to talk me through how it does that and what has to happen to achieve it? Thanks.

If your company buys a car it will be eligible for tax allowances (writing down allowances) which reduce the profit subject to tax.

The amount of writing down allowance depends on the CO2 emissions and the purchase date. This link details what your company could claim https://www.gov.uk/capital-allowances/business-cars

 

[nickoedwards]

Thanks everyone. By the looks of things, if the company profit is less than the cost of the vehicle that year you're able to "carry the remainder over" to the next.

 

[Financial-Modeller]

IIRC owing to accounting treatment when the company eventually disposes of the vehicle, the company only enjoys the benefit on the depreciation cost, not the whole cost.

 

[jimbof]

More likely a VW Polo

6l in a Polo would be much more exciting than in a G wagon...

 

[NortonBishop]

Don't forget that the disadvantage of obtaining tax relief on 100% of the purchase price is that there is a gain subject to tax when you sell the thing.

 

[Spur Support Services]

There are incentives on the initial purchase as mentioned above and there is a lower benefit in kind, although this is changing year on year.

I love Norton Bishop's reminder about the tax on sale proceeds which stresses that first year tax relief is just a timing difference. I also love all the reminders about practical issues.

Tax incentives are there to encourage behaviours, rather than drive business choice.
Most tax policies are devised by looking at larger business, where the ratio of return on capital employed may be very different to the micro business scenario.

It important that you consider the lifetime costs and cashflows of a number of alternative options when coming to commercial decision, based on your personal business circumstances and environmental values.