Company Cars

How it works

To qualify the vehicle must have emissions under 50g Co2.

You would purchase the hybrid car in the name of your company.  All documentation with regards to the car, e.g. V5 document must be in the company name as the car will be an asset of your company.

You can fund the purchase of the car from the reserves you have built up in your company or by finance, or by a mix of both.  Finance can be in the company name or, if necessary, yours.

Different tax relief options are available depending on the type of finance you take, please refer to the Finance section.

If the vehicle is available for private use, you as director would have an amount of “benefit in kind” which you would pay tax on, please refer to Product Range Table. The company also pays National Insurance on the benefit in kind.

e.g. – if the BIK was £2500 and you were a basic rate taxpayer you would pay 20% tax = £500 in personal tax, if you were a higher rate taxpayer you would pay 40% tax = £1000.

It is difficult to avoid demonstrating that you do not have availability for private use of the vehicle.  It is possible that, by ensuring that car insurance does NOT allow for social, private or similarly-worded  description of use, and that it is shown as business use only, will achieve this.

If your vehicle is for business use only, your company can claim back the Vat on the purchase price of the vehicle if it’s a new car (this includes an ex-demonstrator, as we understand it).  Second hand models do not qualify for Vat.

You would pay for fuel costs yourself and claim mileage for the vehicle at the agreed fuel rate for the car (a few pence per mile).  The company can recover costs of repairs, insurance etc.  You can also put in a claim, properly prepared, for the use of home electricity to charge the car battery.

Finance

You have three finance options.

  1. Business or personal hire purchase.
  2. Business or personal PCP.
  3. Business contract hire.

Under Business hire purchase and business PCP your company will own the vehicle.  This means that we can claim 100% tax relief of the purchase price against your profit for the year.

e.g. if your company’s profit at its year end is £50,000 and your car was £50,000 this would mean you would have NO corporation tax to pay in the year.

With Business contract hire it’s different as this is effectively a “lease” meaning your company does NOT own the asset so different tax relief applies.  You only get tax relief on your monthly payment, you can recover Vat on the payment element  if you company operates standard rate vat.

e.g. 12 monthly lease payments of £1000pm in the year at the corporation tax rate of “20% = £2400 of tax relief in the year.

As you can imagine the first two options are more expensive in cash flow terms as the company owns the vehicle, compared to the leasing option.

PCP is cheaper each month than hire purchase due to a balloon payment required at the end of the financial agreement to take full ownership of the vehicle. Overall though, it works out more expensive.

There is also help from the Scottish Government where they will currently lend your company up to £35,000 interest free to purchase a hybrid vehicle www.energysavingtrust.org.uk/scotland/grants-loans/low-carbon-transport-business-loan

Benefits

100% tax relief will be able to be claimed on vehicles below 50grams Co2 if meeting the above conditions.

All associated costs of running the vehicle, e.g. car insurance, tyres, repairs and road tax can be put through your company and tax relief can be claimed on these expenses.

More than 1 car can go through your company if you are purchasing a car for an employee to use.  The same tax reliefs and implications would apply.

Future planning

If you are purchasing a vehicle and it’s not on a contract hire i.e. a “lease”, you will be able to claim 100% tax relief if meeting the above conditions.  That being the case, when you come to get a new vehicle in the future and you need to trade in your hybrid car you will pay tax on its disposal proceeds. Of course this could be offset by purchasing a new hybrid car through your business at that time.

In the 2018/19 tax year to qualify for 100% tax relief the Co2 emissions have to be 50 grams or below.  We don’t know if this will change for 2019/20.

The government are getting wise to hybrid technology and I expect the Co2 rate to decrease further in time.

Key tips

  • My number one tip is do all your own research.
  • Certain manufacturer’s offer contributions to hybrid cars and this can vary from branch to branch, so it’s worthwhile shopping around and negotiating.
  • The Product Range Table is a summary of vehicles that I have looked into in late 2017 but there new ones appearing all of the time.
  • Test drive a few; this can be difficult as the hybrids are still not readily available compared to diesel and petrol cars.
  • Make sure all documentation is in your company’s name, remember this is not your personal car it’s your business’s car.

Product Range Table

Typical examples as at 31/7/17

  RRP from (£) 0 - 60mph (s) CO2 (g) MPG BIK (£)
Sports Cars          
BMW i8 1.5 Coupe 103,930 4.4 49 135 7,275 Video
Porsche Panamera S Hybrid 79,715 4.6 56 89 8,770 Video
           
4X4          
Audi Q7 Quattro Etron 59,995 6.2 48 157 4,200 Video
Porsche Cayenne E-Hybrid 71,500 5.9 75 87 7,865 Video
Volvo XC90 E-Hybrid 65,255 5.3 49 135 4,570 Video
           
Sports Saloons          
Mercedes E Class E350e 44,840 6.2 57 134 4,935 Video
Mercedes C Class C350e 42,965 5.9 52 123 4,275 Video
BMW 330e 34,475 6.1 44 148 2,415 Video
BMW 530e M Sport 44,785 6.2 46 141 3,135 Video
BMW 740e 69,775 5.4 49 135 4,885 Video
Volkswagen Passat GTE 34,515 7.6 39 166 2,415 Video
           
Hatchbacks          
Volkswagen GTE Golf 31,555 7.7 39 166 2,210 Video
Audi A3 etron Sports Back 33,430 7.6 38 166 2,340 Video
BMW i3 30,980 7.2 12 471 2,170 Video
Toyota Prius 31,395 11.1 22 283 2,200 Video
           
Active Tourer          
BMW 2 Series 37,655 6.7 46 126 2,635 Video
Mini Couper SE Countryman 34,085 6.8 49 134 2,385 Video
           

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