Company or private purchase costs in Sept 2019

[thegruf]

Hi - Could some kindly soul with knowledge of such matters please update me on the latest UK tax rules and relative ownership (not cost of owning relatives!) costs for a Tesla purchased around now either as private or company (cash purchase not HP/PCP).
Thanks.

 

[Jason71]

As a private individual cash is cash. You pay the advertised price (which includes the £3500 government grant discount)

As a company purchaser you still pay the advertised price (which includes the £3500 grant discount)
There is no reduction in VAT you pay the whole cost
BUT
There is a 100% first year write down against corporation tax. So you can claim the total cost of the vehicle against profit. With ICE you can only do a small % each year. Obviously when you come to sell the car it all balances so it's not a real saving but you get to keep the money while you own the car and therefore use it.

The main benefit of company ownership at present is the BIK for the next 3 years is 0%,1%,2% respectively (this year it is 16%)
Either as an employee or small business owner/driver that is a big benefit since you basically get to spend untaxed money on the car and then pay almost no tax on the benefit. given that for a higher rate tax payer with a similarly priced ICE car the BIK could be 30% this represents an annual saving of perhaps £3500.
Then there is the VED, Insurance, Tyres etc that can all also be paid for by the company as similarly untaxed expenses since the company owns the car the company can pay them.

As far as I can remember that is about it.

 

[booyaka76]

As above - I've purchased via my Ltd company using EST loan (6 years 0% interest)

100% write off in 1st year (then if/when you sell, profit comes back in)
0/1/2% BIK next 3 years.

no brainer for me

 

[Steveh8]

Lease through the company and you can claim 50% of the VAT on the lease payments?

 

[Jason71]

As above - I've purchased via my Ltd company using EST loan (6 years 0% interest)

100% write off in 1st year (then if/when you sell, profit comes back in)
0/1/2% BIK next 3 years.

no brainer for me

You're right. If you have your own company it does feel like a total no brainer right now. I cannot think of a single good reason NOT to go the company route. Especially as you can always buy it from the company later if you prefer to own it outright later if say the BIK goes back to 16% in 4 years (lets hope not).

 

[thegruf]

Thanks guys - it's basically what I thought but I wanted to see if there were any pitfalls I wasn't aware of as I haven't been looking for a while.

... as you can always buy it from the company later if you prefer to own it outright later if say the BIK goes back to 16% in 4 years (lets hope not).

that's exactly what I did with a previous one when the BIK went up.

 

[WannabeOwner]

cash purchase

That would give you the opportunity to buy before end of this quarter (or do a dash-and-pack at the end of the next one) which might score you something, particularly if they have an ex-demo lying around that fits your bill. I'm sure you know that, so just jogging your memory

Other than that as others have said for Company Car. If you buy it now you have to sacrifice the BIK until the new rate kicks in next year.

Luxury Tax on Road Licence fee year 2+ (AND on 2nd owner, if sold within first year, which might be a thing on an ex-demo car)

 

[thegruf]

@Upgraded
aha - luxury road tax - definitely behind the curve on that one.
Any more detail on that please (seem to recall an @Upgraded search result is more accurate than Google)

 

[Asterix187]

Is it 100% of the car cost? So car costs 36k you can claim a corporation tax reduction of 36k? I was under the impression it was just the corporation tax payment of 20% so you get the standard VAT rebate and then a 7.2k reduction in corporation tax.

 

[Jason71]

@Upgraded
aha - luxury road tax - definitely behind the curve on that one.
Any more detail on that please (seem to recall an @Upgraded search result is more accurate than Google)

Its a form of car tax i.e VED (vehicle excise duty) all cars with list price >£40k pay it for 5 years in years 2 to 6 ( first year VED is free) current rate £320. likely to go up by maybe £10 per year I expect.

 

[Jason71]

Is it 100% of the car cost? So car costs 36k you can claim a corporation tax reduction of 36k? I was under the impression it was just the corporation tax payment of 20% so you get the standard VAT rebate and then a 7.2k reduction in corporation tax.

There is no VAT rebate on Cars. you pay the full 20%. there are a few exemptions but trust me you won't quality they are very limited and strict.
The reduction in corporation tax is just as you say. You spent £36K so you make 36K less profit so you get to pay £7.2K less corporation tax. Sounds straight forward and it is but normally on the purchase of a car you don't get to do that you can only write of a small part of the cost of the car against corporation tax each year ( capitol allowance). So with an ICE car you spend the money but still have to pay most of the corporation tax anyway then claim it back a bit at a time each year. So with the EV it works how most people would logically expect in the first place it is the way it works for an ICE car that is complex.

 

[Rooster6655]

Hi - Could some kindly soul with knowledge of such matters please update me on the latest UK tax rules and relative ownership (not cost of owning relatives!) costs for a Tesla purchased around now either as private or company (cash purchase not HP/PCP).
Thanks.

Main benefit specifically compared to an ICE car purchased through a company
-Lower BIK
-100% write down

The benefit to buying through a company vs personally:
-Get to use pre taxed money for the car and expenses
-If you have excess funds in your company and you don't want to go into the higher tax bracket then its a good way to get a car without being taxed at the higher rate

The benefit to buying in cash is that you don't have to finance say at 4% whether its through HCP/Lease etc

 

[WannabeOwner]

seem to recall an @Upgraded search result is more accurate than Google

Google more instant though and @Jason71 post above has the details

Its a form of car tax

 

[Asterix187]

Main benefit specifically compared to an ICE car purchased through a company
-Lower BIK
-100% write down

The benefit to buying through a company vs personally:
-Get to use pre taxed money for the car and expenses
-If you have excess funds in your company and you don't want to go into the higher tax bracket then its a good way to get a car without being taxed at the higher rate

The benefit to buying in cash is that you don't have to finance say at 4% whether its through HCP/Lease etc

Great thanks. That was my understanding also but some of the posts on here seem to indicate you get 100% of the car cost back, not just the tax saving on corporation tax.

 

[Rooster6655]

Great thanks. That was my understanding also but some of the posts on here seem to indicate you get 100% of the car cost back, not just the tax saving on corporation tax.

Just the now 19% corporation tax saving

 

[WannabeOwner]

some of the posts on here seem to indicate you get 100% of the car cost back, not just the tax saving on corporation tax.

I think it is close to even-stevens.

#1 Buy an EV, get the 100% first year capital allowance. Sell the car e.g. 3 years later, and pay tax on the "profit".

That works out about the same as:

#2 Buy a car, use capital allowances / depreciation etc. in your books, as "normal", and at the end it works out about the same.

But ... in the first example you have the use of the money, so if you can put it to work then all well and good. maybe you can also avoid falling into higher tax bracket by reducing company profit etc.

Accountants prefer the second, more "straight line" predictable, less-lumpy, route.

I prefer the first because I can definitely make good money from the lump sum over three years.