Buying ev via Ltd company - running costs accounting
Discussion
Fastlane said:
All vehicle expenses go under Under "Motor Vehicle Expenses" (account code 409 in Xero) and as such the company pays. PCP and lease payments go under "Operating Lease Payments (457). As such, generally with a PCP you cannot claim the 100% FYA.
Depends if it is an operating lease or not - not sure of the rules (I am an accountant but not a tax specialist) but I understand that there is some disagreement over whether or not a pcp does get you the first year allowance, and some pcps might and others not. Putting that to one side, the bik rules assume that the company pays for all running costs other than fuel (though electricity is defined specifically as not being a fuel) so insurance and maintenance and tyres etc can all be charged to the p&l in full and get full corporation tax deduction.
cb31 said:
oop north said:
the bik rules assume that the company pays for all running costs other than fuel (though electricity is defined specifically as not being a fuel)
So does the company pay for the charging or is it pence per mile?If you take a company car (even if it's your own company) you can log business usage and charge back at HMRC rates.
The big question is, can anyone be arsed with it or even worrying about getting that bit wrong and later penalised? Most Ltd owners with the revenue to support an EV as a perk almost certainly live in a house where they can charge at home and for the average mileage driver on an off peak rate it's going to cost a £3-400 pa. Just pay it. And if you have a company premises plug in there as much as possible, nobody - including yourself - can possibly know exactly how much of the power goes into the car. Externally no one can know if any of it did. That's probably the easiest way to get tax free volts without complicating the accounts or record keeping.
Reclaiming charging costs is weird. It is arguable that HMRC’s own guidance is wrong because electricity is specifically defined as not being fuel.
Dealing with the charging at work thing first, that is specifically exempted from being a taxable benefit - for own car never mind company car. Because my office is at home all home charging is tax free, both for company EV and my personal EV (if I had one)
For personal EV used for business miles the tax free payment is the usual 45p for first 10,000 miles in a tax year, then 25p
But for company EV it’s murky because HMRC have issued guidance that claims that electricity is taxable (incorrectly according to my tax lecturers) unless the business pays directly for charging for business miles only and no private mileage is covered. But you might need to be a tax expert to argue that one. And companies may not be supported by their accountants in this who won’t go against HMRC guidance
Dealing with the charging at work thing first, that is specifically exempted from being a taxable benefit - for own car never mind company car. Because my office is at home all home charging is tax free, both for company EV and my personal EV (if I had one)
For personal EV used for business miles the tax free payment is the usual 45p for first 10,000 miles in a tax year, then 25p
But for company EV it’s murky because HMRC have issued guidance that claims that electricity is taxable (incorrectly according to my tax lecturers) unless the business pays directly for charging for business miles only and no private mileage is covered. But you might need to be a tax expert to argue that one. And companies may not be supported by their accountants in this who won’t go against HMRC guidance
lizardbrain said:
Their isn’t a 409 btw
The code meant I think is 490 - vehicle costs
Sorry, I actually meant 449, or at least that's what it is on my chart of accounts, sounds like yours may be different.The code meant I think is 490 - vehicle costs
I am no accountant but have been running company EVs for over 3 years now. To be honest, when I first looked into them in 2019, my accountant hadn't got a clue. I'm sure that are all clued-up on them now.
I don't claim any mileage or electricity whatsoever. I've been told that I can pay for an account, like BP Pulse, via the company but I don't bother as I rarely use the network and home charging is still ridiculously cheap (famous last words!).
Given the other benefits, I don't think it's worth the hassle but depends on the type of mileage you're doing.
Otherwise I claim everything including the dashcam.
Given the other benefits, I don't think it's worth the hassle but depends on the type of mileage you're doing.
Otherwise I claim everything including the dashcam.
oop north said:
Reclaiming charging costs is weird. It is arguable that HMRC’s own guidance is wrong because electricity is specifically defined as not being fuel.
Dealing with the charging at work thing first, that is specifically exempted from being a taxable benefit - for own car never mind company car. Because my office is at home all home charging is tax free, both for company EV and my personal EV (if I had one)
For personal EV used for business miles the tax free payment is the usual 45p for first 10,000 miles in a tax year, then 25p
But for company EV it’s murky because HMRC have issued guidance that claims that electricity is taxable (incorrectly according to my tax lecturers) unless the business pays directly for charging for business miles only and no private mileage is covered. But you might need to be a tax expert to argue that one. And companies may not be supported by their accountants in this who won’t go against HMRC guidance
This is exactly why I suggest not 'going there'. As an ltd operator that has gifted themselves a near tax free, tax deductible high value car.Dealing with the charging at work thing first, that is specifically exempted from being a taxable benefit - for own car never mind company car. Because my office is at home all home charging is tax free, both for company EV and my personal EV (if I had one)
For personal EV used for business miles the tax free payment is the usual 45p for first 10,000 miles in a tax year, then 25p
But for company EV it’s murky because HMRC have issued guidance that claims that electricity is taxable (incorrectly according to my tax lecturers) unless the business pays directly for charging for business miles only and no private mileage is covered. But you might need to be a tax expert to argue that one. And companies may not be supported by their accountants in this who won’t go against HMRC guidance
You're already enjoying a free lunch, don't spoil it by trying to work out if you can also get a tiny saving on a few hundred quid of power too... It's just not worth the complication or potential later imposed definitions of HMRC.
Work chargers and use are safe. Home charging or charging back for mileage using typical ice rates are not entirely well defined and not as safe.
I have an £80k car via my ltd, that is safe, it's a result of government taxation designed specifically to make me make that choice. It costs me about £300 a year to charge... So long as that tiny amount of money is less clearly defined tax-wise, just pay it post tax personally. Take yourself and your ltd out of potential future firing lines..
HMRC are a shocking mess these days, they're tied up in litigation over contractor tax avoidance going back over a decade because they didn't define the rules and now they want to turn back time and recoup. You can't talk to them properly, they won't confirm what is right or wrong about anything they don't currently have a very clear set opinion on, such as EV charging paid for by the company in people's homes. If they have yet to be crystal clear in what they define, just avoid it. Otherwise, you'll one day end up arguing with moron about their decision and you'll lose anyway.
I understand that the allowance and business HP with balloon concern comes down to is more capital
Being paid off than the balloon/ final payment.. Ie is it a guaranteed future value then this would not be suitable .
I personally would get a gfv figure at the time of purchase and set a balloon to be lower than this . From having read the examples this would be ok but run it past an accountant . Or the safer option is to straight HP if financing the vehicle.
Being paid off than the balloon/ final payment.. Ie is it a guaranteed future value then this would not be suitable .
I personally would get a gfv figure at the time of purchase and set a balloon to be lower than this . From having read the examples this would be ok but run it past an accountant . Or the safer option is to straight HP if financing the vehicle.
I understand that the allowance and business HP with balloon concern comes down to is more capital
Being paid off than the end of term value.. Ie is it a guaranteed future value then this would not be suitable .
I personally would get a gfv figure at the time of purchase and set a balloon to be lower than this . From having read the examples this would be ok but run it past an accountant . Or the safer option is to straight HP if financing the vehicle.
Being paid off than the end of term value.. Ie is it a guaranteed future value then this would not be suitable .
I personally would get a gfv figure at the time of purchase and set a balloon to be lower than this . From having read the examples this would be ok but run it past an accountant . Or the safer option is to straight HP if financing the vehicle.
Edited by jrinns on Saturday 18th February 07:33
oop north said:
Fastlane said:
All vehicle expenses go under Under "Motor Vehicle Expenses" (account code 409 in Xero) and as such the company pays. PCP and lease payments go under "Operating Lease Payments (457). As such, generally with a PCP you cannot claim the 100% FYA.
Depends if it is an operating lease or not - not sure of the rules (I am an accountant but not a tax specialist) but I understand that there is some disagreement over whether or not a pcp does get you the first year allowance, and some pcps might and others not. Putting that to one side, the bik rules assume that the company pays for all running costs other than fuel (though electricity is defined specifically as not being a fuel) so insurance and maintenance and tyres etc can all be charged to the p&l in full and get full corporation tax deduction.
I confess to just taking his word for it, which isn't something I normally do. I normally read up on tax to confirm as i feel it's my responsibility as a director, but admit to missing this one. I think I'll read up on it, not that there's anything I can do now the car is owned outright but just in case I do this again.
Zero Fuchs said:
That's an interesting one and I wasn't aware there were differences. However, I discussed an EV purchase at length with my accountant, sent them the PCP agreement and they were happy that I could claim the 100% FYA.
I confess to just taking his word for it, which isn't something I normally do. I normally read up on tax to confirm as i feel it's my responsibility as a director, but admit to missing this one. I think I'll read up on it, not that there's anything I can do now the car is owned outright but just in case I do this again.
This makes the case very clearly, but there are many more examples explaining why generally PCPs are treated as operating leases:I confess to just taking his word for it, which isn't something I normally do. I normally read up on tax to confirm as i feel it's my responsibility as a director, but admit to missing this one. I think I'll read up on it, not that there's anything I can do now the car is owned outright but just in case I do this again.
https://www.cronertaxwise.com/community/my-vip-tax...
Fastlane said:
This makes the case very clearly, but there are many more examples explaining why generally PCPs are treated as operating leases:
https://www.cronertaxwise.com/community/my-vip-tax...
That's brilliant, thanks. I wonder if this was because the final payment for my £45k i3s was just £14k after 3 years, so ridiculously low. That's just 30%, which is low by many standards. Unfortunately COVID has skewed used prices but it was worth about £25k after 3 years (68 plate) but I believe it was still expected to be about £20k.https://www.cronertaxwise.com/community/my-vip-tax...
I recall we had a discussion on whether I was going to purchase or hand back after the term. Writing down the tax would've been stupid to then have to sort out paying some of it back so he was very firm on my intentions. I'm not sure, other than sensibility, whether that had anything to do with how he accounted for the car.
But given all that, I think I'd go the HP route next time. I was silly for taking out PCP as I'd put down a £16k deposit and ended up paying it off easily, but at the time I wasn't 100% whether to put the cash into another part of the business. Hindsight eh.
TheDeuce said:
This is exactly why I suggest not 'going there'. As an ltd operator that has gifted themselves a near tax free, tax deductible high value car.
You're already enjoying a free lunch, don't spoil it by trying to work out if you can also get a tiny saving on a few hundred quid of power too... It's just not worth the complication or potential later imposed definitions of HMRC.
Work chargers and use are safe. Home charging or charging back for mileage using typical ice rates are not entirely well defined and not as safe.
A decent accountant can, fairly easily, give each client the answer to this. The accountant just needs to know their specific circumstances.You're already enjoying a free lunch, don't spoil it by trying to work out if you can also get a tiny saving on a few hundred quid of power too... It's just not worth the complication or potential later imposed definitions of HMRC.
Work chargers and use are safe. Home charging or charging back for mileage using typical ice rates are not entirely well defined and not as safe.
MaxFromage said:
TheDeuce said:
This is exactly why I suggest not 'going there'. As an ltd operator that has gifted themselves a near tax free, tax deductible high value car.
You're already enjoying a free lunch, don't spoil it by trying to work out if you can also get a tiny saving on a few hundred quid of power too... It's just not worth the complication or potential later imposed definitions of HMRC.
Work chargers and use are safe. Home charging or charging back for mileage using typical ice rates are not entirely well defined and not as safe.
A decent accountant can, fairly easily, give each client the answer to this. The accountant just needs to know their specific circumstances.You're already enjoying a free lunch, don't spoil it by trying to work out if you can also get a tiny saving on a few hundred quid of power too... It's just not worth the complication or potential later imposed definitions of HMRC.
Work chargers and use are safe. Home charging or charging back for mileage using typical ice rates are not entirely well defined and not as safe.
TheDeuce said:
Not if it's a poorly defined area of the rules and HMRC later backtrack. it happens and the best accountants in the world get caught out sometimes if HMRC move the goalposts and backdate.
You can always give the right advice, you just have to sometimes caveat it. Then the client can make the right decision at that point in time. You can't do any more. MaxFromage said:
TheDeuce said:
Not if it's a poorly defined area of the rules and HMRC later backtrack. it happens and the best accountants in the world get caught out sometimes if HMRC move the goalposts and backdate.
You can always give the right advice, you just have to sometimes caveat it. Then the client can make the right decision at that point in time. You can't do any more. The point remains, if HMRC haven't nailed down their own very clear definitions then be cautious. Especially, as per my earlier post, the cost in question is just the tax difference between a few hundred quids worth of power either paid for pre or post extraction for the ltd. It's just not enough money to start making guesses about what will ultimately qualify as deductible - just pay it post tax and move on.
For now at least.
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