Tesla via small Ltd Company
Discussion
Anyone be kind enough to link any detail on lowest cost route to Standard Range Model 3 ownership if you have a small limited company (only me in it) which is beneath the VAT threshold? Asked Tesla for some guidance but they just sent a guide for employees buying company cars which isn't what I need. Then they said ask an accountant, so I asked a not a very good one who wouldn't really offer decent suggestion :-)
Thank you in advance.
Thank you in advance.
If your accountant can't help you really need a new accountant. Best route is to lease the car via the company and then the company can pay for all the running costs as well (not that there is much besides insurance). Effectively you are drawing the vehicle costs out of the company tax free. You will need to pay a benefit in kind on the vehicle, but it's only 1% for this tax year. If this makes no sense to you, get a decent accountant ASAP.
The main advantage of leasing through a business is 50% vat relief and offsetting the lease cost as expenses before drawing a salary.
If you buy the car (outright or through HP) you can offset 100% of the purchase cost against corporation tax in year one. Plus roll it over in to following years if you're not paying enough CT in year one.
After doing the maths we decided to buy but Porsche Taycan's rather than Telsa's - same pricinpal though - it made more sense for us and we intend to keep them for circa 5 years.
If you're not VAT registered though it suggest a small turnover and you may want to get advice from a decent accountant as buying means the car would be on balance sheet and may compromise the business if you wanted any future borrowing whereas leasing is off balance sheet.
If you buy the car (outright or through HP) you can offset 100% of the purchase cost against corporation tax in year one. Plus roll it over in to following years if you're not paying enough CT in year one.
After doing the maths we decided to buy but Porsche Taycan's rather than Telsa's - same pricinpal though - it made more sense for us and we intend to keep them for circa 5 years.
If you're not VAT registered though it suggest a small turnover and you may want to get advice from a decent accountant as buying means the car would be on balance sheet and may compromise the business if you wanted any future borrowing whereas leasing is off balance sheet.
As the OP has a small business, I'd never recommend buying. The EV market is too volatile at the moment and future values too uncertain. Leasing gives certainty for those with lower profits/net assets, and to be honest, most clients will lease as well. Obviously if you want to keep them for 5 years, ownership makes more sense. Either way, it's very tax efficient. There may be more vehicles purchased outright in the future given the increase in corporation tax to 25% for profits over £250K.
Edited by MaxFromage on Sunday 22 August 20:48
Interesting info thank you. Car would be a standard range and Id keep it say 3 years (until the cybertruck arrives). Will ask my accountant tomorrow to buck their ideas up and give me some ideas/options - I dont think they will be as helpful as youve all been tho, so cheers for that.
I rate my (chartered) accountant highly but she so didn’t know much about company cars until I brought it up. They should be willing to look it up though?
Not sure what volatile means? Pricing seems pretty steady and BEVS are one of the more predictable markets and depreciation seems fine.
If not VAT registered you can still benefit from capital allowances.
Not sure what volatile means? Pricing seems pretty steady and BEVS are one of the more predictable markets and depreciation seems fine.
If not VAT registered you can still benefit from capital allowances.
aparna said:
I rate my (chartered) accountant highly but she so didn’t know much about company cars until I brought it up. They should be willing to look it up though?
Not sure what volatile means? Pricing seems pretty steady and BEVS are one of the more predictable markets and depreciation seems fine.
If not VAT registered you can still benefit from capital allowances.
It's her job to be honest. EVs are one of the few areas left to save clients money, so accountants should be on top of this by now. She's not alone to be honest, many are clueless.Not sure what volatile means? Pricing seems pretty steady and BEVS are one of the more predictable markets and depreciation seems fine.
If not VAT registered you can still benefit from capital allowances.
Maybe volatile isn't the right word. But vehicles/tech are moving forwards rapidly, and as an accountant, my job is to minimise risk where appropriate. There's no real advantage to buying for most, so locking in costs give certainty.
981 said:
Anyone be kind enough to link any detail on lowest cost route to Standard Range Model 3 ownership if you have a small limited company (only me in it) which is beneath the VAT threshold? Asked Tesla for some guidance but they just sent a guide for employees buying company cars which isn't what I need. Then they said ask an accountant, so I asked a not a very good one who wouldn't really offer decent suggestion :-)
Thank you in advance.
I bought a Model 3 through my company (small company, only me). I had a cash fee coming in of around £100k, I needed a new car, so paid around £50k for the Tesla - through the company. It means I only pay tax on the £50k remaining in the company.Thank you in advance.
981 said:
Interesting info thank you. Car would be a standard range and Id keep it say 3 years (until the cybertruck arrives). Will ask my accountant tomorrow to buck their ideas up and give me some ideas/options - I dont think they will be as helpful as youve all been tho, so cheers for that.
The difference is your accountant might actually know about your situation more than others on here. They might not of course.You're not VAT registered so there is no benefit to you on that.
Your cash flow and amoutn on hand is unknown and there may have been beenfits for you in buying to get the 100% FYA allowance although you have to pay back a chunk of that in the future when you sell
You've not stated your business mileage, and at 4p a mile and if you can't easily charge at home you may be better off owning it yourself and taking 45p a mile rather than 4p and potentially making a loss on every business mile. Private leases can also be cheaper than business leases,
You've not said how you pay yourself, if you're paying yourself 10k a year through PAYE and the rest through dividends, the savings aren't as big as somebody in ahigh rate tax bracket (and the fact you're not VAT registered suggests you're in the realms of tax efficient ways of getting money out the company)
A used EV may also be a better option
As an aside, the cybertruck won't be in the UK in 3 years. In fact I doubt the cybertruck will ever be in the UK and given Musk has recently said it would cost a $1m to make one at the moment, they have some way to go to get the costs down to make it worth even putting it into production.
NDA said:
981 said:
Anyone be kind enough to link any detail on lowest cost route to Standard Range Model 3 ownership if you have a small limited company (only me in it) which is beneath the VAT threshold? Asked Tesla for some guidance but they just sent a guide for employees buying company cars which isn't what I need. Then they said ask an accountant, so I asked a not a very good one who wouldn't really offer decent suggestion :-)
Thank you in advance.
I bought a Model 3 through my company (small company, only me). I had a cash fee coming in of around £100k, I needed a new car, so paid around £50k for the Tesla - through the company. It means I only pay tax on the £50k remaining in the company.Thank you in advance.
Heres Johnny said:
Incomplete advice. When the company sells the car for say 30k in 3 years, you'll be paying tax on 130k.
£130k? I doubt that.I have no plan to sell the car until it's fully depreciated - I may structure the company to have some debt in it too at that time. Non issue.
NDA said:
£130k? I doubt that.
I have no plan to sell the car until it's fully depreciated - I may structure the company to have some debt in it too at that time. Non issue.
Sigh…I have no plan to sell the car until it's fully depreciated - I may structure the company to have some debt in it too at that time. Non issue.
Did you read the OPs question?
You’ll be running the car for 20 years to depreciate it to zero and if you took 100%FYA you’d get no more depreciation benefits on the car. If you sold at 3 years, assuming you had another 100k from regular business, the sale prices gets added to the profit, hence 130k
Given the OP isn’t paying, a5 least not from the business, a lot of high rate tax,the 100% FYA allowance will probably write off all profits and leave them with no effecient use of their tax allowances, and in three years if they sell they’d possibly end up with the whole sale value being taxed at their highest rate.
If you’re not bothered about understanding and answering the OPs question then carry on, we’re all interested in your largely irrelevant tax affairs.
I think OP said income was lumpy. I am in relatively
similar position. If I do sell early, it’s quite likely I can time the disposal to coincide with large fixed expenses, to minimise any tax. If it’s worth it.
However My plan was to buy new and run into the ground. So there is a fair chance that by the time comes the bik landscape will have changed to make most of this advise require adjustment.
similar position. If I do sell early, it’s quite likely I can time the disposal to coincide with large fixed expenses, to minimise any tax. If it’s worth it.
However My plan was to buy new and run into the ground. So there is a fair chance that by the time comes the bik landscape will have changed to make most of this advise require adjustment.
Here’s the accountants response:
“Buying an electric car through a Limited Company, the company would save corporation tax on the full cost of the vehicle in the year of purchse.
Leasing an electric car through a Limited Company, the company would save corporation tax on the cost of the lease payments for the length of the lease.
The benefit in kind on an electric car for the current tax year (2021/2022) is 2% of the manufacturers list price, for example £50,000 list price x 1% = £500 benefit in kind. If you are a higher rate tax payer this would cost you £200 tax a year (£100 per year if your income is below £50,000). The percentage increases to 2% from April 2022.”
“Buying an electric car through a Limited Company, the company would save corporation tax on the full cost of the vehicle in the year of purchse.
Leasing an electric car through a Limited Company, the company would save corporation tax on the cost of the lease payments for the length of the lease.
The benefit in kind on an electric car for the current tax year (2021/2022) is 2% of the manufacturers list price, for example £50,000 list price x 1% = £500 benefit in kind. If you are a higher rate tax payer this would cost you £200 tax a year (£100 per year if your income is below £50,000). The percentage increases to 2% from April 2022.”
981 said:
Here’s the accountants response:
“Buying an electric car through a Limited Company, the company would save corporation tax on the full cost of the vehicle in the year of purchse.
Leasing an electric car through a Limited Company, the company would save corporation tax on the cost of the lease payments for the length of the lease.
The benefit in kind on an electric car for the current tax year (2021/2022) is 2% of the manufacturers list price, for example £50,000 list price x 1% = £500 benefit in kind. If you are a higher rate tax payer this would cost you £200 tax a year (£100 per year if your income is below £50,000). The percentage increases to 2% from April 2022.”
Almost right but if the accountant didn’t mention what happens when you dispose of the car means they’re giving you a partial picture and a potential sizeable tax bill in the future “Buying an electric car through a Limited Company, the company would save corporation tax on the full cost of the vehicle in the year of purchse.
Leasing an electric car through a Limited Company, the company would save corporation tax on the cost of the lease payments for the length of the lease.
The benefit in kind on an electric car for the current tax year (2021/2022) is 2% of the manufacturers list price, for example £50,000 list price x 1% = £500 benefit in kind. If you are a higher rate tax payer this would cost you £200 tax a year (£100 per year if your income is below £50,000). The percentage increases to 2% from April 2022.”
981 said:
Here’s the accountants response:
“Buying an electric car through a Limited Company, the company would save corporation tax on the full cost of the vehicle in the year of purchse.
Leasing an electric car through a Limited Company, the company would save corporation tax on the cost of the lease payments for the length of the lease.
The benefit in kind on an electric car for the current tax year (2021/2022) is 2% of the manufacturers list price, for example £50,000 list price x 1% = £500 benefit in kind. If you are a higher rate tax payer this would cost you £200 tax a year (£100 per year if your income is below £50,000). The percentage increases to 2% from April 2022.”
Is that all they wrote? If so, find someone who will add some detail (comparison to your current vehicle costs/tax efficiency etc) and also talk about disposal as noted above.“Buying an electric car through a Limited Company, the company would save corporation tax on the full cost of the vehicle in the year of purchse.
Leasing an electric car through a Limited Company, the company would save corporation tax on the cost of the lease payments for the length of the lease.
The benefit in kind on an electric car for the current tax year (2021/2022) is 2% of the manufacturers list price, for example £50,000 list price x 1% = £500 benefit in kind. If you are a higher rate tax payer this would cost you £200 tax a year (£100 per year if your income is below £50,000). The percentage increases to 2% from April 2022.”
Thanks for the replies - pretty hopeless info from the accountant I'm not much clearer.
Expained I need to know that (since below VAT level) do I ignore teh monthly repayments on sites where theres an option for Company Hire where the VAT is knocked off and so If i use the Personal Hire type figures of say GBP4,000 upfront and, say, GBP450 per month over 3 years how does it all work?
As you can see I know very little and was hoping shed help (bloomin useless!!)
Expained I need to know that (since below VAT level) do I ignore teh monthly repayments on sites where theres an option for Company Hire where the VAT is knocked off and so If i use the Personal Hire type figures of say GBP4,000 upfront and, say, GBP450 per month over 3 years how does it all work?
As you can see I know very little and was hoping shed help (bloomin useless!!)
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