Company Purchase of M3

[Mark Johnson]

With the current lack of PCP from Tesla, what are others looking at from a business point of view?

I am a small freelancer with Ltd company, and its looking like a personal lease would be better for me.

 

[tonyj01]

Do seek advice from your accountant.

The limited company might be able to buy the car outright (you or the company might borrow the money) then you can have 100% write down against corporation tax.

I guess you need to take drawings from the company to live but your accountant will be able to advise if this company car purchase will reduce your overall tax bill.

Tony.

 

[jimbaret]

I have been thinking of this as well. In order to spread the cost wouldn't it be possible to borrow the money (from a lender - say Lombard for example) for the full price of the vehicle in a limited company, pay with that cash and then use the 100% write down against corporation tax in the 1st year.? That way you are not giving the ltd company cash flow issues right away.

 

[WannabeOwner]

100% write down against corporation tax in the 1st year.?

Don't forget that a consequence of 100% first-year-writedown is that incur tax when the vehicle is sold

Works for me, having the use of that money for e.g. 3 years.

 

[Mark Johnson]

Yeah spoke to accountant and he says from accounting POV through business is best. It’s just the fact that the monthly’s are high on HP.
Maybe the loan idea may work.

 

[Filenotfound]

Well worth getting a loan and paying 100% as you will get Enhanced First Years Capitail allowance and so 19% of the price (well 19% you don't have to pay the taxman depending on your companies prodfits)
If you HP or lease then you cant and you can only claim the 19% writeoff on monies paid in the "first year"

This only really works well If you intend to keep the car for several years as the depreation value can also be written off, If you plan to sell the car on in 1/2 years then know that price you get for the car is counted as "profit" and then subject to the 19% owed to Mr Taxman.

It is also worth noting that this year BIK (benifit in kind) is 16% BUT next year it drops down to a crazy 2%. This is a GUESS but I would not be susprised if the Gov remove the very nice 100% first year write off when BIK is at 2%.

2020 onwards new company car is a EV ! there is going to be a lot of companies buying them next year.

 

[BubblegumPete]

This is what I've done. I bought the car cash through both savings and a loan but loaning the company the money so that I pay it back through the company in monthly instalments.

 

[Nell]

Yup. Very advantageous to buy in company name for tax purposes - but register in personal name (as user not owner) as insurance generally cheaper that way than if the car is registered in a company name. Reduced BIK changes from next year plus tax deductions for all running costs (albeit low) and electricity not being seen as a fuel for “private use fuel” tax - all add up to a no brainer decision for single owner/director companies to run EVs as company cars.

Just hoping Tesla can deliver me some metal before the government reduces all this! Day 1 M3 reservation, Day 1 order (LR subsequently upgraded to P-). No news - apart from invoice being reissued at higher cost excluding Government Grant today...... which set the pulse running for a few minutes until I worked it out. By their dreadful communications Tesla are doing their best to put off a generation of new Tesla owners before they’ve even received the product.

 

[BubblegumPete]

HI Nell,

I had a three emails about order changes today. The latest one actually has the price reduction to put it in-line with the price changes they made a few weeks after first orders. Do you know if your latest order agreement reflects this? If not it's worth ringing them to make sure they're going to honour this for you as it's a £3700 difference.

 

[Nell]

HI Nell,

I had a three emails about order changes today. The latest one actually has the price reduction to put it in-line with the price changes they made a few weeks after first orders. Do you know if your latest order agreement reflects this? If not it's worth ringing them to make sure they're going to honour this for you as it's a £3700 difference.

I ordered a LR and subsequently upgraded to P- so no price reduction just a modest increase for me. I lost the reduced early order price of FSD as a result of upgrading to P-, (again early adopters being disadvantaged).....

 

[WannabeOwner]

Very advantageous to buy in company name for tax purposes

Interesting that you describe is as "very advantageous". Apart from the opportunity it creates to invest the money short term, I'm not sure it is much/any? different at the end compared to how asset depreciation would otherwise handled in company accounts.

electricity not being seen as a fuel for “private use fuel” tax

(That's available to all employees, so not specifically a benefit of a company car.)

FWIW I struggle to charge more than about 50% at work. I have a relatively long commute (40 miles each way) so would have expected at-work charging to be significant proportion; I haven't analysed in detail, but weekend charging and days when I am on business trips and don't go via office must account for the other 50% at-home-charging - although doesn't feel like they are common - more common would be go to work, (charge) and then do a client visit locally ...

Either way, its 2p-3p a mile for Electricity so even at 30,000 miles a year its only £800-ish ... the £400 50% at work that I get for free, and no BiK, is not going to make a huge difference to me .... at least not compared to the £4,000 a year I'm now saving on Diesel!

 

[Jason71]

Interesting that you describe is as "very advantageous". Apart from the opportunity it creates to invest the money short term, I'm not sure it is much/any? different at the end compared to how asset depreciation would otherwise handled in company accounts.

Its all about the tax!

Enhanced Capital Allowances (ECAs). An ECA allows a business to write off the whole cost of an asset against taxable profits in the year of purchase. ECAs for cars are based on their CO2 emissions.
Cars purchased with CO2: Of 50g/km or less qualify for a 100% First Year Allowance (FYA). This allowance only applies to new cars. Cars that are leased do not qualify.
Up to 110g/km qualify for a writing down allowance at 18% a year;
Over 110g/km qualify for a lower "special rate pool" writing down allowance of 8% a year.

this benefit currently extends until 2021 and is effectively a 20% discount assuming your company is making profits

there is also of course the very low bik for the driver from next year ( relatively low now)

 

[WannabeOwner]

Its all about the tax!

You get 100% writeoff in year one
You pay tax (on the gain) when you sell the car

Apart from having the use of the money whilst you own the car is it actually different (tax-wise) to straight line depreciation (that would normally apply to a car purchase)?

 

[Rooster6655]

With the lower BIK rate next year it make its very attractive as a company car choice, whether its advantageous to purchase through a company vs personally will depend on your situation and the amount of money you earn.

Also worth noting that in some cases you can carry forward a corporation tax bill to the next year or claim for the previous year, makes an interesting idea for someone setting up a new company. Probably best to see an accountant for each person's situation.

 

[WannabeOwner]

With the lower BIK rate next year it make its very attractive as a company car choice

We don't offer company cars ... but are contemplating offering incentive for staff to move to EVs (this thread: Company Employee Loan For Ev Purchase? )

 

[Rooster6655]

We don't offer company cars ... but are contemplating offering incentive for staff to move to EVs (this thread: Company Employee Loan For Ev Purchase? )

Yes seems a bit of hassle to start handing out company cars but I can see people who already have the option of company cars to be choosing EVs more next year

 

[gr4z]

I am also thinking of a M3 for a company purchase. I am a freelancer running a Ltd company but was looking at leasing, for the reason that technology is advancing so quickly that in 3 years there will probably another Tesla or equivalent with better tech to replace it with. Rather than having to sell it and re-buy I would just hand it back and take another lease.

I realise that I would get the 100% write down, but would I miss out on anything else?

 

[Jason71]

You get 100% writeoff in year one
You pay tax (on the gain) when you sell the car

Apart from having the use of the money whilst you own the car is it actually different (tax-wise) to straight line depreciation (that would normally apply to a car purchase)?

OK. fair enough, but who thinks that far ahead

 

[WannabeOwner]

who thinks that far ahead

Well ... either you have a plan to use that money within the company ... or not!

You don't actually get any money until your year end when you do the accounts / tax calculation ... and then you wind up paying less Corporation tax, but olny when that becomes due ... so its not exactly "cash in pocket" when you buy the car ... although you have the same delay when you sell it, before you have to pay ...

Of all of that there is definitely the opportunity to buy the day before your year end and then, when you sell, to do that the day after year end

So here's a usage for that money to consider:

Use it to pay redundancy on a disruptive member of the team, and increase performance of whole team by 10% as a result. That will make plenty of difference to Bottom Line

 

[Jason71]

You get 100% writeoff in year one
You pay tax (on the gain) when you sell the car

Apart from having the use of the money whilst you own the car is it actually different (tax-wise) to straight line depreciation (that would normally apply to a car purchase)?

The company could use the money to buy Tesla shares. Then by the time you sold it and the capitol charge came due you'd be rich/screwed (delete as applicable).