With Making Tax Digital finally coming into implementation at the start of April, some business owners have had their long-time bookkeeping methods thrown into disorder as they have had to make the move from Excel spreadsheets and, in some cases, physical account books, to the digital world. In the world of accounting, using spreadsheets is pretty much obsolete nowadays, and the introduction of MTD was long overdue. 

 

For most business owners, this move over to MTD wasn’t too traumatic, as more and more of us are moving our business practices to online – or cloud-based – methods anyway. Old-fashioned methods of storing information are no longer commonplace (who remembers floppy disks?!) and we, as a nation, are becoming more digital-savvy. 

 

The table below shows the BiK rate payable for company cars registered after 6 April 2020. The percentages are applied to the full list price value of the vehicle, including any extras. 

 

For example, if you purchase an AEV for £40,000, with zero emissions, there is no BIK for 2020/21. However, in 2021/2022 this rises to 1% / £400 and in 2022/2023 this rises to 2% / £800. If you fall within the basic tax rate band, which is 20% of the £400 BIK, therefore you will pay £80 tax on your electric company car. 

 

Once your vehicle moves away from being zero emission, these percentages increase dramatically, and you could end up paying much more. 

For example, if you purchase an AEV for £40,000, with zero emissions, there is no BIK for 2020/21. However, in 2021/2022 this rises to 1% / £400 and in 2022/2023 this rises to 2% / £800. If you fall within the basic tax rate band, which is 20% of the £400 BIK, therefore you will pay £80 tax on your electric company car. 

 

Once your vehicle moves away from being zero-emission, these percentages increase dramatically, and you could end up paying much more. 

 

When buying a brand new fully electric car or one that has a CO2 rating lower than 50g/km, the employer can claim 100% capital allowances on the price paid. This therefore reduces the Corporation Tax for the company. 

 

For example, a vehicle with a list price of £40,000 will reduce your taxable profit by £40,000 and 19% of that gives a corporation tax saving of £7,600 in the year of purchase. 

 

The employer can also claim corporation tax relief on the vehicle maintenance and insurance costs. 

 

 

The advantage of buying a new (first registered owner) zero emissions electric car is that the employer can claim 100% of the paid price as a capital allowance (see above). 

 

For new hybrid cars, the 100% capital allowance is no longer available – instead you will qualify for a standard 6-18% writing down allowance. This is dependent on its CO2 emissions. 

 

The capital gains allowance on a second-hand electric company car is not the full 100%, instead you will be able to claim a standard 18% writing down allowance each year. This is also dependant on its CO2 emissions. Click here to find out more. 

 

To reclaim the VAT, the car must be for business use only. Bearing in mind that the HMRC views any commuting between your home and regular place of work as personal use, and not business travel, proving that the car is exclusively business use is very unlikely. 

 

Regardless of whether the car is purchased personally or by the company, if it’s purchased for a mix of personal and business, VAT will be charged, and you cannot reclaim it. 

 

Yes, this is possible – but it still needs to meet all the conditions of a standard pool car, i.e:- 

 

It is available to, and used by, more than one employee, 

It is made available to employees by reason of their employment, 

It is not ordinarily used by one of the employees to the exclusion of others, 

Any private use by an employee is merely incidental to their business use of it, and; 

It is not normally kept overnight on or near the residence of any of the employees unless it’s kept on premises occupied by the provider of the car. 

 

 

Yes, a business can pay for the installation of a charging point at the employee or directors’ home without incurring a tax charge on the employee. 

 

This is also treated as a tax-deductible cost for the company – so the company will get tax relief on the cost. 

 

 

Electric vans, unlike electric cars, do qualify for the super-deduction which means a mighty 130% capital allowances are available. For a van costing £30,000, this means £7,410 of tax relief! 

 

There are also no taxable benefits for an employee, even with some personal use. 

 

If you need assistance from an accountancy firm with the tax, NI or VAT calculations on your electric company car purchase, contact us to see how we can help you.