Tax on Company Cars!
The rules around tax on company cars are changing, quite dramatically. In this episode we outline the key changes and tell you which choices may be best. Watch this to find out more.
Hi and welcome to another episode of BaranovTV designed to demystify the world of accounts and tax and to help your business grow.
There have been a lot of changes recently around company car tax and most particularly around whether they’re electric vehicles or hybrid vehicles.
Generally our recommendation is always not to put a vehicle through a company because the tax implications are so onerous.
However, the changes that are coming in in April 2020 are going to flip that quite dramatically.
The benefit in kind charge, which is calculated on the purchase price of a vehicle, drops to zero on a fully electric vehicle from April 2020.
That is going to increase to 1% the year after and 2% the year after that, but that is a massive change and actually it can make a considerable difference to the business.
Hybrid is on a sliding scale so it’s not as straightforward, it’s a sliding scale but it depends on the range of the vehicle is capable of. As a result, it will be a very different scale if the vehicle can only do up to 30 miles between charges than if it can do 130 miles on a charge.
So with a hybrid you need to think about the range far more but if you’re looking to buy an electric vehicle whether it’s fully electric or not then range will be something that you’ll become very familiar with I’m sure!
The other thing to consider is that the ability to write the value of the vehicle against your corporation tax changes depending on the emissions that the vehicle puts out.
So, if the vehicle emissions are less than 50 grams per kilometer and it is new and unused at the point that you purchase it, then the company can claim the full amount of the vehicle against corporation tax.
That allowance drastically reduces, down to eight percent, if the emissions are over 110 grams per kilometer, so you do need to be very aware of the implications as far as emissions are concerned.
The main things to remember if you’re looking at purchasing either electric or a hybrid vehicle are that your calculations on a tax basis, will be based on:
- the list price of the vehicle,
- the cost of any options that you’ve put on it,
- the delivery
- the VAT
It is the total of those four figures that gives you the price on which your benefit in kind tax will be calculated.
You obviously need to think about the range if you’re looking at an electric vehicle and the emissions.
So those are the key things to consider when you’re weighing up which option you want to take.
Once you’ve decided what vehicle you’re going to have you need to tell the Revenue that you’ve got that vehicle within the quarter in which you take ownership of it or you take delivery of it and you would declare that to them on a form P46 car within that quarter, and then at the end of the tax year you would need to declare that vehicle on your P11D.
If we do your P11Ds then that’s easy, you just need to make sure that we’ve got all the details of the vehicle and we’ll take care of that for you.
PLEASE NOTE – The figures and the implications of all of that I’ve just outlined are based on an outright purchase of a vehicle by a company. If you’re thinking about leasing the vehicle then there are different set of considerations that you may want to run by us.
Generally our guidance would be that if you’re looking at a purely electric vehicle then it would be a good thing to do, put it through the company.
If you’re looking at hybrid check with us because there are other implications and if you’re thinking non electric, non-hybrid then our guidance would be the same. It’s probably not going to be worth putting through the company.
If you want to check with us then of course please do get in touch, but those would be our general guidelines.
Electric is probably a good thing to do, hybrid check and a traditional petrol diesel is probably not even worth looking at because the figures would be scary high.
So, a quick whistle stop explanation of how the tax rules are changing around benefit in kind and vehicles.
If you want to know any more as ever please do get in touch but I’ll leave you with that.
See you soon!