UK tax incentive issue

[arg]

I think the BIK is less than for ICE polluters?

Yes. Last week I had a coding notice from HMRC - they'd incorrectly re-classified my car into the max gas guzzling category and the benefit went up from £6k-ish to £53k!

They claimed it was my fault for filing the P11D incorrectly - allegedly the form has recently changed to have Electric as a distinct category when it was previously "other fuel". However, on checking the 2016-17 form it doesn't have that category, so on the face of it I was being penalised for not applying the 2017-18 rules to the 2016-17 form...

 

[WannabeOwner]

I was being penalised for not applying the 2017-18 rules to the 2016-17 form

Can't imagine why you have a problem with that ...

 

[unbelievable]

Well, I ordered one personally. You only live once right? I saw that the rates had gone from 1.5% to 2.5% and that put me in a panic. Rang Tesla up and they said they had been ringing potential customers to advise them. They obviously didn’t think I was serious as no one had contacted me. Anyway, after a bit of toing and froing, they agreed to honour the 1.5% rate.

Sometimes, when I make large purchases I feel a sense of guilt directly afterwards. The only feeling I have had this time is an overwhelming sense of excitement.

 

[MagicMagicD]

Well, I ordered one personally. You only live once right? I saw that the rates had gone from 1.5% to 2.5% and that put me in a panic. Rang Tesla up and they said they had been ringing potential customers to advise them. They obviously didn’t think I was serious as no one had contacted me. Anyway, after a bit of toing and froing, they agreed to honour the 1.5% rate.

Sometimes, when I make large purchases I feel a sense of guilt directly afterwards. The only feeling I have had this time is an overwhelming sense of excitement.

I spoke to my salesperson at Birmingham earlier and he said there was nothing that could be done, the APR had increased and that was that. Going for an extended test drive on Sunday, guess I'll see if they're willing to cut a deal or not.

 

[arcus]

Sometimes, when I make large purchases I feel a sense of guilt directly afterwards. The only feeling I have had this time is an overwhelming sense of excitement.

That's the right feeling to have when it comes to Tesla. Guilt can wait!

 

[unbelievable]

I spoke to my salesperson at Birmingham earlier and he said there was nothing that could be done, the APR had increased and that was that. Going for an extended test drive on Sunday, guess I'll see if they're willing to cut a deal or not.

Had you already had finance approved? If so, I would argue that it’s a deal breaker and you will put down a deposit if they agree to give you the low rate. Good luck.

 

[WannabeOwner]

Sometimes, when I make large purchases I feel a sense of guilt directly afterwards

Here, borrow my phrase, kept for those occasions:

"Couldn't afford not to have it"

 

[Peteski]

Well, I ordered one personally. You only live once right? I saw that the rates had gone from 1.5% to 2.5% and that put me in a panic. Rang Tesla up and they said they had been ringing potential customers to advise them. They obviously didn’t think I was serious as no one had contacted me. Anyway, after a bit of toing and froing, they agreed to honour the 1.5% rate.

Sometimes, when I make large purchases I feel a sense of guilt directly afterwards. The only feeling I have had this time is an overwhelming sense of excitement.

Nice one, glad you found a way in the end. FWIW, my wife is an owner of a small accountancy firm and when she worked out the cost/benefit of putting it through the company it actually worked out more expensive down the line. Although you get 100% FYA, you have to pay BIK and tax on the residual when you dispose of the vehicle and this latter tax is often overlooked. Overall it was a loss when she crunched the numbers. It only looks good in the first year. I think it only works out cheaper as a company owned vehicle if it's used 100% for business mileage.

 

[WannabeOwner]

you have to pay BIK

You'd have to pay that on any company car - and at a much higher rate for ICE - so the "long run cheaper" only applies if you were not buying it as a company car - but in that scenario you've lost the "opportunity cost" on the money

My expectation is to buy the Tesla from the company (company bought the car "cash"). Whatever AnyCar's worst price is, on the day, is fine for a valuation. For a car bought on lease you would probably get a lower valuation for buying it out of finance - particularly if there would also be a a mileage penalty if it were to be handed back

Or at least that's how my Man maths works!

 

[Peteski]

You'd have to pay that on any company car - and at a much higher rate for ICE - so the "long run cheaper" only applies if you were not buying it as a company car - but in that scenario you've lost the "opportunity cost" on the money

My expectation is to buy the Tesla from the company (company bought the car "cash"). Whatever AnyCar's worst price is, on the day, is fine for a valuation. For a car bought on lease you would probably get a lower valuation for buying it out of finance - particularly if there would also be a a mileage penalty if it were to be handed back

Or at least that's how my Man maths works!

In this case we are considering company owned vs personal ownership and which is cheaper overall. Of course an ICE is massively more expensive as a company purchase, but that's not the issue here.

I do "man maths" of course, but my wife is a Chartered Tax Accountant so she does real life maths and is often dealing with other business owner clients "man maths"! If it was actually cheaper overall to PCP a Tesla through the company then of course she would do it that way. If you buy the car upfront in cash, maybe that changes things, I don't know.

 

[arg]

Although you get 100% FYA, you have to pay BIK and tax on the residual when you dispose of the vehicle and this latter tax is often overlooked. Overall it was a loss when she crunched the numbers. It only looks good in the first year. I think it only works out cheaper as a company owned vehicle if it's used 100% for business mileage.

I think it's actually the opposite - biggest win with company owned is if you do zero business mileage. If you do business mileage in a privately owned car, you can pay yourself tax-free mileage allowance (or claim against your tax if your employer is too mean to pay the approved rates) - in an EV, the mileage rates probably exceed the marginal cost of operating the car for those extra miles. Conversely, doing private mileage in a company EV (unlike an ICE company car where scale rates apply) the company can pay for charging the car without tax implication. However, this probably isn't a huge consideration for many people.

The corporation tax side I agree is much less a benefit than often presented - 100% first year allowances, but offset by having to pay tax on the gain when sold, so typically a cash-flow benefit rather than an actual tax saving per se.

Assuming cash purchase, it's quite straightforward to see whether it's cheaper to do it privately (assuming that you own the company or the company is willing to adjust your salary in a cost-neutral way). The net costs of operating the car are the same regardless of who owns it: depreciation, maintenance and insurance. If the company owns the car, all those costs are paid by the company from untaxed funds, but you pay income tax and NI on the nominal BIK amount being a percentage of list price. If you own the car, you need to draw additional income from the company to pay those costs and pay tax on it. If you draw from the company as salary, it's a very simple comparison: is the depreciation+maint+ins number bigger or smaller than the BIK number? If you draw from the company as dividends, then it's a marginally more complicated calculation to account for the different tax rate.

Since the depreciation is highest in the initial years, it means the company route is more beneficial the shorter the time you intend to keep the car (as the depreciation number is going down but the BIK value never changes), though the change in applicable percentages tweaks that a bit (they have been going up, making it even more the case that you want to stop after a couple of years, but are scheduled to go down again). It also makes company ownership less attractive for a used purchase.

I haven't studied the tax implications of doing PCP or leasing from this point of view.

 

[WannabeOwner]

that's not the issue here

OK, but that's with respect to your specific circumstances. Others may have different opportunities.

WRT BiK - yup you have to pay the tax, but in return the company pays the Road Tax, Service, Tyres and Insurance (and maybe some other stuff to - e.g. repairs). For example : if you have a 17 year old child who wants to start driving then, for that person, the BIK looks cheap

I have a relatively ECO ICE as a company car and thus the BIK is fairly low and works out around £1,000 p.a.. Insurance is not particularity expensive (rural location, old-codger, etc) but its hard to imagine that I would spend less than £1,000 p.a. on Road Tax, Service, Tyres and Insurance . Sure the BIK on a £100K non-EV car is a lot lot more ... but assuming BIK is "just a tax" is not the whole story either.

 

[Peteski]

OK, but that's with respect to your specific circumstances. Others may have different opportunities.

WRT BiK - yup you have to pay the tax, but in return the company pays the Road Tax, Service, Tyres and Insurance (and maybe some other stuff to - e.g. repairs). For example : if you have a 17 year old child who wants to start driving then, for that person, the BIK looks cheap

I have a relatively ECO ICE as a company car and thus the BIK is fairly low and works out around £1,000 p.a.. Insurance is not particularity expensive (rural location, old-codger, etc) but its hard to imagine that I would spend less than £1,000 p.a. on Road Tax, Service, Tyres and Insurance . Sure the BIK on a £100K non-EV car is a lot lot more ... but assuming BIK is "just a tax" is not the whole story either.

I was speaking from the point of view of the OP i.e. a company owner, not an employee. It's a completely different scenario to yours.

 

[Peteski]

I think it's actually the opposite - biggest win with company owned is if you do zero business mileage.

That's not the way my wife presented it to me. I'll ask her to clarify, but I thought there was some major tax advantage to running the car 100% for business usage. Again this is from the perspective of a business owner rather than an employee. When she worked it all out, it was definitely more expensive to put it through the business in our case. I'm not an accountant myself and not particularly interested in the details, but she knows this stuff inside out and how best to play it. She looked at leasing it too and I don't think that was significantly cheaper either and she didn't like the idea of the car being owned by a 3rd party lease company. So we went with the Tesla personal PCP deal in the end.

 

[arg]

I'll ask her to clarify, but I thought there was some major tax advantage to running the car 100% for business usage.

If it was literally 100% business, you would fall into the 'pool car' category, then there's no personal benefit and you don't pay any tax on it at all - but you can hardly have any personal usage at all before falling out of that.

 

[JonG]

100% business use (and it has to be 100%) means you can claim the vat back. Very few can convince the tax man

Some get excited about the 100% first year write down, but that’s largely just a cash flow benefit.

Running as a company car results in challenges over reclaiming mileage. The AMR for full electric is zero, at best you can claim receipted charging costs. Owning it yourself means you can pay yourself 45p a mile. Do 10k milesa year and charge on super chargers or free destination chargers could mean over 4K tax free.

But it’s a complicated..

 

[WannabeOwner]

I was speaking from the point of view of the OP i.e. a company owner, not an employee. It's a completely different scenario to yours.

Just to clarify: I am company owner. In case it was the point of confusion: I have two company cars - a small Eco ICE and the MS.

 

[Peteski]

If it was literally 100% business, you would fall into the 'pool car' category, then there's no personal benefit and you don't pay any tax on it at all - but you can hardly have any personal usage at all before falling out of that.

That was it. That's why it had to be 100% business use and not practical for us or most other business owners.

 

[Peteski]

Just to clarify: I am company owner. In case it was the point of confusion: I have two company cars - a small Eco ICE and the MS.

So in that case when you said that the company pays for Road Tax, service, tyres, insurance - that means you are still effectively paying for it yourself out of the business. It's the same with us and overall my wife (business owner & chartered accountant) says it works out more expensive overall than buying it outside of the company. She knows how to calculate it correctly in detail, so I have no argument there! I just thought it might make the OP feel a little better about not putting it through his business in the end. May have actually saved some money!

 

[WannabeOwner]

that means you are still effectively paying for it yourself out of the business

Ah now I get it, thanks. I should not have drawn a like-for-like comparison between Maintenance Cost and BIK.

For me to pay that, personally, I have to first pay Tax and NI etc., so the company's £1 spent on a recoverable expense is worth somewhat more than my own £1, but to know exactly how much needs some more careful maths