PCP or Business Contract Hire

tillathenun

I have a bit of a dilemma on my hands. We're looking to get a new electric car and I'm conflicted as to whether we should do personal PCP or a standard business lease (contract hire).

Due to the company credit rating taking a Covid-hit, the only way we can get it is by putting down a large upfront payment of £10k. Since the money isn't in the company to do that, we'd have to put that in as directors.

The contract hire obviously looks cheaper on paper than PCP and I've been telling my wife that, being zero emissions, an electric car is 100% tax deductible (and 50% of the VAT can be reclaimed). We have a limited, VAT-registered company by the way.

She's challenged me on this though so I want to get some facts from people who know far more than I!

So: to get an electric car with contract hire, is it effectively 'free'?

Thanks in advance!

Grumpy_chap

Have you asked your Accountant?

An EV is eligible for 100% first year write-down, but that only applies to purchase.  Aren't all lease cars eligible to be off-set against operating costs?  With an adjustment for private use?

BIK is very low, so you can take the EV as a company car almost avoiding NI, income tax, corporation tax and dividend tax.  

This all seems more of a cutting tax question that motoring.  Maybe you could ask a moderator to move this to the more appropriate board?

tillathenun

I have asked the accountant but trying to get a simple answer from them is a struggle!

I will ask the moderator to move it to a more appropriate group. Many thanks!

MSE_ForumTeam5

We've moved this to the Cutting Tax board 

nick74

tillathenun said:

So: to get an electric car with contract hire, is it effectively 'free'?

Definitely not free! You write the cost of the car off against your taxable profits, not the tax liability itself if that is what you are thinking?

tillathenun

Thanks — I've seen ads from EVision about "free cars" that threw me a bit! https://www.evrent.co.uk/freecar/

nick74

tillathenun said:

Thanks — I've seen ads from EVision about "free cars" that threw me a bit! https://www.evrent.co.uk/freecar/

Just marketing spin/nonsense I'm afraid. They appear to be trying to suggest that because the taxable benefit to the employee is much lower than a conventional car, that somehow makes it 'free'.