Why and how to buy an electric car for your company31/05/2022
Electric cars are skyrocketing in popularity as the price of gasoline continues to rise and the sale of new petrol and diesel cars ends in 2030. Aside from the financial savings, another significant benefit of an electric vehicle is that it reduces emissions of hazardous pollutants and is better for the environment than its more traditional peers. Company owners should also be aware that an electric car comes with tax advantages. With all these benefits, it’s time to ask yourself: should my company get an electric car?
Electric cars provide several cost-cutting advantages, including exemption from road tax and congestion charges, as well as the ability to claim Capital Allowances for the installation of electric charging stations. However, the method through which you receive your corporate automobile might have a variety of benefits for you and your organisation.
Purchasing an electric vehicle
You can claim Capital Allowances whether you buy an electric car altogether or lease one.
They qualify for first-year allowances, which allow you to deduct the cost of the automobile from your pre-tax profits for that accounting period.
Furthermore, if the automobile is utilised only for business purposes, you may be entitled to recover the VAT paid at the time of purchase. However, the company must be VAT-registered in order to do so.
VAT cannot be recovered if the vehicle is utilised for personal purposes as well.
Be advised that if the Capital Allowances claimed during the life of the vehicle exceed the cost, a balancing charge will be applied and you will get less disposal profits.
Should you pick this option, there is additional Corporation Tax savings on the hire purchase interest that the firm must pay during the life of the financial contract.
The plug-in car grant, which presently gives up to £1,500 for electric vehicles costing less than £32,000, is another government incentive for the purchase of electric vehicles.
Renting an electric vehicle
Rather than buying an electric car outright, you may spread the expense by leasing one.
This option also allows you to deduct the cost of leasing from your taxable profits. As you do not own the vehicle Capital Allowances cannot be claimed.
If the vehicle is utilised only for business purposes, VAT may be claimed, just as it is with purchases. If used for personal purposes, up to 50% of the VAT may be recovered.
Personal Contract Purchase (PCP) financing is normally placed in the same category as leasing.
First-year Capital Allowances may apply if the balloon payment (a payment to acquire the vehicle altogether) is less than the estimated market value of the vehicle.
Of course, regardless of how you get an electric corporate car, you will benefit from a variety of everyday benefits, such as reduced fuel costs and good PR, if you choose to flaunt it. If you are considering going electric but want more help and advice, feel free to contact JW Hinks on 0121 456 0190. Our friendly and professional team can help you work out whether it’s the right move for you and your business.