Phev and company car costs/ my own business with a phev

[Ianrlangley]

Hi, I am seriously considering the purchase of the Phev gx3h, but wanted to know if anyone new about the tax implications etc. I run my own business (a partnership with my partner) and am looking at putting the vehicle through the business as 95% of the time the car is used for business use.
Does anyone know the associated benefits and costs relating to purchase through a business. We are looking at contract hire over 3 years at £330 a month with £990 upfront payment. From what I understand I can put the entire car through the business.

Anyone with knowledge please let me know, hoping to buy it on Monday,

Thanks
Ian

 

[maddogsetc]

Big subject with lots to cover - you might get a better response if you can be more specific about what you want to know.

Have you searched this forum as it's been discussed here before?

Another good place to start is here: http://www.nextgreencar.com/

 

[Eggtastico]

I am assuming you mean a business lease rather than a personal contract hire?

Leasing a car does not get the write down benefit, however the lease is an expense so you can offset them V's your Tax.

You be better off speaking to your accountant as every business is different.

For example :-
If you done 500 miles a week for example, you might be better off on a personal contract & claiming 45p / 25p from your business as the mileage rate alone would return £8250 - but then a Phev would not be suitable for that mileage.

As you are only doing 20 miles a day, then going electric is a no brainer. If you pay for all the fuel (Electric & Petrol), you can still claim 16p per mile from your business, despite you not personally owning the vehicle. - this is the best route for any electric vehicle.

If you went the purchase route, then the whole purchase price can be written down in the first year, I also believe that any interest paid can be offset against your tax. You can also claim back 50% of the Vat if your are Vat registered (Not VAT flat rate though) & 100% if the vehicle is for business use only. If the 5% is insignificant travel - like dropping kids of at school before work - stopping off at a shop on the way home, etc. - then you can go the route of having the vehicle for business use only.

BIK is 5% - so assuming running your business tax efficent means about £30 a month for your P11D

Hopefully that will give you some food for thought to speak to your accountant about. More you know about your travelling & useage, then the better advice he can give you.

 

[Ianrlangley]

Hi thank you for your great reply. I will chat with my accountant in the morning. The business is just a partnership at the minute but were looking at going Down the limited company route as we are growing year on year. The vehicle will be 95% business use so I presume the monthly business lease can go trough the books completely as an expense (we're flat rate vat so that would be excluded I would imagine?)

Regards
Ian

 

[maby]

I am assuming you mean a business lease rather than a personal contract hire?

Leasing a car does not get the write down benefit, however the lease is an expense so you can offset them V's your Tax.

You be better off speaking to your accountant as every business is different.

For example :-
If you done 500 miles a week for example, you might be better off on a personal contract & claiming 45p / 25p from your business as the mileage rate alone would return £8250 - but then a Phev would not be suitable for that mileage.

As you are only doing 20 miles a day, then going electric is a no brainer. If you pay for all the fuel (Electric & Petrol), you can still claim 16p per mile from your business, despite you not personally owning the vehicle. - this is the best route for any electric vehicle.

If you went the purchase route, then the whole purchase price can be written down in the first year, I also believe that any interest paid can be offset against your tax. You can also claim back 50% of the Vat if your are Vat registered (Not VAT flat rate though) & 100% if the vehicle is for business use only. If the 5% is insignificant travel - like dropping kids of at school before work - stopping off at a shop on the way home, etc. - then you can go the route of having the vehicle for business use only.

BIK is 5% - so assuming running your business tax efficent means about £30 a month for your P11D

Hopefully that will give you some food for thought to speak to your accountant about. More you know about your travelling & useage, then the better advice he can give you.

I'm interested that you think that any fraction of the VAT can be reclaimed - I didn't think that applied to company cars - will check with our accountant - that would be a welcome couple of thousand less!

 

[maby]

OK - Just looked at the HMRC web site and I was right - you cannot reclaim any of the VAT on the purchase of a company car except under very limited circumstances. You can reclaim VAT as described above on the lease costs.

 

[Stu]

If the 5% is insignificant travel - like dropping kids of at school before work - stopping off at a shop on the way home, etc. - then you can go the route of having the vehicle for business use only.

This is not the case with a car, unfortunately. You can do this with a van, but a commute of any kind, no matter how small, in a company car will automatically deem it to be available for personal use and attract the associated BIK.

You'd technically need to leave the car at your place of work and make your own way to and from the workplace for the car to qualify as business use only. There are a few exceptions where you could take it home, such as occasionally using the car first thing in the morning to travel to a customers in the opposite direction to the workplace, but HMRC are extremely tight on this and declaring a car to be business use only will attract their attention.

The BIK for private use that the PHEV attracts, however, is close to insignificant and hardly worth over exposing yourself for, although it's worth all company PHEV drivers noting that there will be a net increase of around 40% in the tax year 16/17 in the BIK payable. This will no doubt be the government realising they are missing a trick on EV and PHEV company cars.

As has already been mentioned, the best thing to do is seek advice from your accountant.

Cheers

 

[Eggtastico]

OK - Just looked at the HMRC web site and I was right - you cannot reclaim any of the VAT on the purchase of a company car except under very limited circumstances. You can reclaim VAT as described above on the lease costs.

you can claim 100% vat if its for business use only.
Maybe the 50% is with Vans and not cars - similar to how I got the insignificant travel wrong.
Maybe Mits will do a 4 work version similar to the diesel model so it is classed as a car derived van.

 

[maddogsetc]

I'm pretty certain that Maby is correct on this - VAT can only be recovered on lease rental payments and it's 50% (rather than 100%) if there is any private use at all.

If you purchase (or if you use any finance product which allows an option to purchase at some point) then you cannot recover any VAT.

 

[Stu]

I'm pretty certain that Maby is correct on this - VAT can only be recovered on lease rental payments and it's 50% (rather than 100%) if there is any private use at all.

If you purchase (or if you use any finance product which allows an option to purchase at some point) then you cannot recover any VAT.

I'd agree with that. Exceptions are such things as taxis and hire cars.

It's worth noting that if your lease covers maintenance then you can reclaim 100% of the maintenance portion of the lease cost, so it would be important to get a breakdown of the overall cost from the lease company. This is irrespective of whether there is any private use or not.

Vans are a little different. You can claim 100% on a van regardless of how it was purchased, however, if there is significant private use then HMRC can make an adjustment to the percentage you claim back based on the split between private and business miles, e.g. if the use was 50% business miles and 50% private miles you could be restricted to claiming only 50% VAT.

Cheers

 

[Posty]

I run the phev through my limited companies books too. For simplicity I've just assumed 50% of monthly lease vat is claimable and of course all of the lease payments are 100% allowable against year end corporation tax bill. As I only pay myself a small salary to keep below the income tax and NI threshold (the remainder paid as dividend from profits) the bik plus my salary is still below my personal allowance and so no tax is paid here either.

Insurance costs and fully allowable, as are maintenance costs and for the latter you can reclaim 100% of the vat back. As most phev drivers won't be doing huge mileages this isn't a massive benefit but it all adds up.

All in all the account was very impressed with the phev. Bik rates are due to increase over the next couple of years but will still only mean a very marginal increase in tax due in the final year of the lease.

As others have said, I think we are benefiting now from a very favourable tax treatment which can't last if the number of eligible cars grows to be a significant number. Enjoy now while it lasts!

Andy

 

[maddogsetc]

As I only pay myself a small salary to keep below the income tax and NI threshold (the remainder paid as dividend from profits) the bik plus my salary is still below my personal allowance and so no tax is paid here either.

Even though you won't be paying PAYE on your salaried income I fear you will still end up paying tax at whatever dividend rate you are liable to, through the year end self assessment.

To paraphrase an old saying, there's no such thing as a free company car.

 

[Eggtastico]

As I only pay myself a small salary to keep below the income tax and NI threshold (the remainder paid as dividend from profits) the bik plus my salary is still below my personal allowance and so no tax is paid here either.

Even though you won't be paying PAYE on your salaried income I fear you will still end up paying tax at whatever dividend rate you are liable to, through the year end self assessment.

To paraphrase an old saying, there's no such thing as a free company car.

I believe £148 a week is the current threshold to stay below PAYE & NI (should always pay volunteer NI though to keep your stamps up ;o) ) - I wouldn't try to avoid paying the BIK as it could be seen as a tax dodge

 

[Keviniomize]

What are you guys doing about personal milage being paid by the company. Are you charging at home at all? If so how do you claim this thought the company? Can you claim as an expense ?

 

[Ozukus]

Now they have an Outlander PHEV for Work you may want to consider this as rates and tax on work vehicles are very different from personal vehicles.

 

[maby]

What are you guys doing about personal milage being paid by the company. Are you charging at home at all? If so how do you claim this thought the company? Can you claim as an expense ?

We don't pay oursevles personal mileage - it's just too much trouble. Don't try to claim for electricity either - just claim business miles at HMRC approved rates.

 

[Posty]

In terms of avoiding the bik charge, there is no change to my previous regime of low salary through payroll and the remainder of my remuneration paid as dividends. Yes of course you pay tax on dividends but it's a lot less than higher rate paye tax. All very standard stuff for small business.

The fun bit is that at 5% bik I could have up to a £40k car and not actually pay any bik tax because that is what is remaining in my personal allowance!

As for mileage rates, I don't do a lot of business miles but what do is claimed at approved mileage rates. I don't claim for any of the elec used at home. Just not worth hassle for the small amounts involved and most of it is personal commuting anyway. Similarly, if I charge up at work using my ltd co's electricity I get it at a lower rate per kWh and can reclaim the vat and set the cost against my corp tax bill. I don't actually do much of this as I haven't got a dedicated wall plug at work, just at home which is far safer and more convenient.

Andy

Still need to do the p11d though which I haven't got round to yet!

 

[sam470]

Hi Ian, low emission vehicles are eligible for a 100% first-year write-down under the Enhanced Capital Allowance scheme. - See more at: http://www.nextgreencar.com/company-car-tax/employer-costs.php#sthash.tU5Vjikt.dpuf.
What most people are talking about here on this thread is BIK which doesn't apply to your business.
Sam

 

[maddogsetc]

What most people are talking about here on this thread is BIK which doesn't apply to your business.

Not sure what you mean by this, unless you are referring to the fact that BIK is paid by the driver not the business? In which case that may be correct but as it's his own business I imagine he will be looking for the most cost effective option overall, ie. taking into account business and personal taxation. That was certainly the case for me.

 

[CJ1045]

If it is his own business and he is not an employee then BIK is irrelevant (does not apply) and it is the capital allowance (100% in the first year) that is the main tax factor.

CJ (Self employed partner in a business)