Tesla UK company car vs personal car

[Philo]

Hi I am wondering if anyone here before me can shed some light on the real costs of running a Tesla as a company car vs a private car. Particularly if you own your company. It's a little confusing and I would love to hear an actual example and whether you chose the company or personal route.


I am based in the UK and want a Model S. I run my own consultancy business. It's a limited company and my wife and I are directors and shareholders. I would likely have a low business mileage. On the face of it the saving on VAT, corporation tax via the write down allowance, and the low benefit in kind rate make the company car route very attractive.

Anyone have experience with this?

 

[pmt32577]

I'm about to purchase via the company route, I'm a similar company to you, had it all checked by my accountant. Firstly, you can't claim the VAT back on a purchase, only some leasing deals. That is only allowed for vans and the like that are necessary for running the business. On the costs, well, on one side, the corporation tax write down means that you get the car without having to pay any income tax on the money used for the purchase - I'm guessing that effectively means a 40% reduction as most people buying a Tesla pay 40% tax and if you are a limited 1/2 man company you will be paying yourself dividends rather than PAYE. If PAYE the savings are greater, with it moving to 46% from April 5th (It was this upcoming increase that made me look at this method of legal avoidance!). However, you then need to pay tax and company NI on the Benefit In Kind. That is 5% this tax year, then 7% , then 9% and keeps on going up. Note that the value you apply that BIK rate to is the full cost of the car before any referral discount and the government grant. With the BIK rate climbing the amount of tax paid each year goes up. I'm viewing it that the company route enables me to buy the car on the cheap but the climbing BIK rate means that in about 3 or 4 years, after the bulk of the depreciation hit has been taken, it will make sense to buy it off the company. I also think that it is becoming more difficult to claim business mileage costs back in the future.
I'm planning to keep the car a long time with the next car being self driving (I hope). I'm also hoping that the government may change their minds on the escalation of BIK rates but since they always short of money that is probably a forlorn hope!

 

[Trikkitt]

I'm about to purchase via the company route

Sounds pretty much like me. I'm looking at using the company to buy it, suffer the depreciation there. If the car is £70k, then the BIK for three years is £14700 but the loss in value is nearer £40,000 (based on Tesla buy-back), and that is without factoring in the cost of service, insurance etc. Then I'll probably look to buy it off the company once the depreciation rate drops to less than the tax rate. As you say the VAT isn't claimable except if you ONLY used the car for business. The moment there is any personal driving you can't claim any VAT back (is my understanding). However when the business sells the car to you that shouldn't attract VAT as you weren't able to reclaim the VAT originally (different apply rules if you did).

Sadly the current government are anti-green policies so I expect things to get far worse on all EV benefits. Therefore I'm very tempted to buy in now....

 

[pmt32577]

I think you are correct on the ONLY bit but in practice you are unlikely to convince HMRC unless it doesn't look like a car!

I still have some hope on the BIK rates, they have just renewed the grant system (admittedly with different rules and not quite so good) and are encouraging incentives in a number of cities, I also think there may be more fallout to come with VW, perhaps with a slight change in focus away from CO2 towards true pollution, they cancelled the alignment of BIK rates for diesel and petrol.

My car arrives next Monday so I'm committed anyway!

 

[Philo]

Thanks for the replies. Think it is still very much worthwhile. So to paraphrase the main tax efficiencies comes from:

• Having the company pay for the depreciation. Thereby reducing profit and saving on corporation tax. Government also allowing 100% of depreciation to be allocated in a single year makes Tesla more attractive than others.
• With the company spending on a car there would also be less available for dividends. Essentially replacing dividends taxable at either the basic or higher rate with use of a nicer car.
• These benefits are usually counteracted by the BIK tax but for Tesla again this is a much smaller sum.

Just waiting for my accountant to figure it out. I asked them the same time i asked the forum.:wink:

 

[Whitmarsh]

You might like to look at the forum on speakev.com (a UK site), where this has been discussed.