Accounting a loss on the p&l when exchanging car

Accounting for electric car loss on a p&l

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I am constantly being told to invest in an electric car for my business because of the government incentive. The issue from my side is the hit profits take monthly when accounting for the depreciation on them.....because the value falls of planet earth with them too. I understand you can spread this over 10 years but realistically i would chop mine in after 3 or so years. What i havent been able to work out it is how it would affect my p&l if i exchanged it after this time.

Could someone be so kind to give me a rough idea. Based on an 80k car they seem to be around 30k after 3 years (mental in my opinion). If i was to then chop this in to the same dealership for another at the same price.....how would this look on the p&l in terms of what i would need to show and what loss it would be?

Thanks!

Replies (8)

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By Leywood
09th Feb 2024 17:43

You need to discuss this with your Accountant. If you havent got one, you can find one here:-
https://www.icaew.com/about-icaew/find-a-chartered-accountant

Other professional bodies are available.

This site is not a free tax/accounting helpline.

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Replying to Leywood:
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By FactChecker
09th Feb 2024 17:51

... nor even a chargeable tax/accounting helpline!

OP: If your "business" (limited company?) can afford and justify an £80k car, then it can afford to have an appointed accountant - who will be able to advise on a lot more than just ad-hoc questions (to which the answers will vary depending on all the factors of your business that you've not surprisingly failed to tell a public forum).

EDIT: I must learn to be patient and wait for those who type faster than me, David!

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By David Ex
09th Feb 2024 17:50

ukrec24 wrote:

I am constantly being told to invest in an electric car for my business because of the government incentive.

Anyone who buys 99.99% of cars as an investment is likely to be disappointed by the return.

If you can afford an £80,000 car, you can afford an accountant to advise you.

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RLI
By lionofludesch
09th Feb 2024 18:42

If you get the depreciation right, there'll be no profit or loss on the sale.

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DougScott
By Dougscott
09th Feb 2024 22:16

Blimey, some mothers do have 'em. Astonished that you run a business tbo.

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DougScott
By Dougscott
09th Feb 2024 22:16

Blimey, some mothers do have 'em. Astonished that you run a business tbo.

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By I'msorryIhaven'taclue
10th Feb 2024 09:27

When the OP says "I am constantly being told to invest in an electric car for my business because of the government incentive" I guess he means his accountant is joining in that chorus.

The OP's not daft.... he knows the second hand prices of EVs have bombed. The supply of new EVs outstrips demand, which ripples down into the second hand market. His estimate of an £80k EV having a trade-in value of £30k three years is realsitic.

OP, Lion mentioned that if you get the depreciation right then there'll be no adjustment when you trade-in the EV. So, using your figures, £50k depreciation over 3 years would mean £16,667 of depreciation in each of those three years' accounts. If you over or under-estimated depreciation (let's say because used EV prices recover and you receive £35k trade-in) then your third and final year's depreciation charge would be adjusted accordingly (to £11,667) to compensate.

Unless you're particularly bothered what your bank or investors think about your P&L figures, then what you're asking about is something of a red herring. The real question should be related to the tax savings: and the most simple answer is that (given your company, not you personally, purchases the NEW EV) your company's taxable profits would reduce by £80k in the year of purchase; and in the year of disposal those taxable profits would increase by the (say £3ok) disposal value. Overall your company would save corporation tax on the £50k "loss" at whatever it's corporation tax rate is (it's not just @ 19% any longer).

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RedFive
By RedFive
10th Feb 2024 09:51

If it appreciates, buy it. If it depreciates then lease it.

With thanks to John Paul Getty.

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