Well, by the time that you read this the Xmas rush will be over with and the new year will be in. I hope for you guys that do the door to door company specials, this year has been kinder to you than recent years. Let’s hope that the historically slow month of January is kind to you, unless you need and deserve the rest.
So now that your head is clear, let’s talk technical on the tax treatment of electric cars. As some of you may know I do speak a bit in the trade and attend such events as Pro Driver, and I keep finding myself test driving electric cars, so I presume they are here to stay until driverless, water driven cars put me and shell out of business, anyway.
What is Claimable against the purchase of plant and machinery or business vehicles?
AIA and FYA: Capital Allowances and 100% deductions under the Annual Investment Allowance (AIA) have been with us for some time now and whilst you can claim AIA on most items of plant and machinery, AIA isn’t usually available on cars unless they can be recognised as plant and machinery.
However, within the Capital Allowances regime are First Year Allowances (FYA), and where an asset qualifies for FYA you can deduct the full cost against profits by claiming 100% allowance in the year of acquisition. FYAs are claimed in addition to AIA – they don’t count towards the AIA limit.
What qualifies: To encourage green investment, ‘Enhanced Capital Allowances’ (ECAs), a type of First Year Allowance, are available for certain energy saving and water efficient equipment that is on the published energy technology and water efficient technologies product list.
Perhaps surprisingly, however, you can also claim FYAs on some cars with low CO2 emissions. 100% FYAs are available on new and unused cars where CO2 emissions are 75g/km or less, or the car is electric.
In the past, ‘low emission’ cars have been fairly limited and have included the Toyota Prius and Nissan Leaf, but this is no longer the case. Many car manufacturers are releasing and offering a range of vehicles with CO2 emissions below 75g/km that are more appealing to the wider market.
As an example, the following are all below the CO2 limit: Audi e-Tron range (Q7), BMW e-range (including 740E, i3), Mercedes plug-in hybrid (including various 350E PHEV C-class and E-class models and S-class 500E), Tesla Model S, Volvo V60 / XC90 plug-in hybrid. Surprisingly, even more, exotic cars such as the BMW i8 (I believe there are one or two licensed, (although their use for private hire is questionable) are also below the limit and, therefore, qualify.
Not mandatory: It is not mandatory to claim a First Year Allowance for a car which qualifies. It may be beneficial not to claim where claiming the full allowance would otherwise create a loss or waste personal allowances. It is also possible to tailor the claim to suit your tax circumstances. Writing Down Allowances can be claimed for any expenditure, not relieved by means of a first-year allowance.
Other benefits: The UK Government has recently defined vehicles which have CO2 emissions below 75g/km as Ultra Low Emission Vehicles (ULEV). These vehicles qualify for a 100% discount on the London Congestion Charge. (I had to mention this, but I would be surprised if anyone TFL licensed didn’t already know this).
Government grants are also available towards the cost of a new electric/plug-in car (or van), as long as it meets certain conditions. The grant generally covers up to 35% of the cost of a car, up to a maximum of either £2,500 or £4,500 depending on the model. Plug-in car grant applications are generally handled by the car dealer.
Of course, you know what I am going to say here. All of this information needs the ratification of a suitable professional to be used properly, and everyone’s case is somewhat different. I would also like to thank my Senior Accountant, Mukit for his help in compiling this information.