Electric Car for a director of a holding company

Can a holding company buy an electric car for personal use of a director?

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I have a personal holding limited company, I'm the sole director and owner. The purpose of the company is to hold an investment, an equity stake in a business. It is not doing any trading

Can I have the company purchase an electric car for my personal use as a director? I will pay BIK since it's for personal use but the fact that the company does not do any trading, does that create any concerns? Anything else I should be aware of?

Replies (21)

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By David Ex
27th Mar 2023 18:48

roger_dillon wrote:

I will pay BIK since it's for personal use but the fact that the company does not do any trading, does that create any concerns?

No concerns for me but you’d be well advised to speak to your accountant about the tax treatment for the company.

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By petercooperuk
27th Mar 2023 19:26

Here's another way to think about it: Would you have concerns about the company paying you a salary?

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Replying to petercooperuk:
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By roger_dillon
27th Mar 2023 19:36

Thanks. Hope you don’t mind my ignorance (and I’m definitely asking an advisor) but on your example, I pay tax and NI on the salary, which could potentially be up to ~50%. So it’s less likely to be an issue and it’s less likely to be used to take out funds anyway, there are more tax efficient ways

As for electric cars, maybe because it sounds too good to be true, I’m wondering if using a company car with ONLY 2% BIK is acceptable

Note that my question also refers to a holding company rather than a trading company. Not sure it matters

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Replying to roger_dillon:
By Ruddles
27th Mar 2023 19:59

What Peter was alluding to (I think) was the question of whether you think that the level of your management services would justify a salary (and if so, how much).

Only an adviser armed with all the facts will be able to give you the correct advice.

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Replying to roger_dillon:
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By Leywood
27th Mar 2023 20:24

roger_dillon wrote:

(and I’m definitely asking an advisor)

You are asking several, on here, for free. We charge for our skills and knowledge.

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Replying to Leywood:
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By roger_dillon
27th Mar 2023 20:50

I totally appreciate it and I dont want to use anyone’s time without paying for it. If you point out a link to me, I’m happy to schedule something formally

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Replying to roger_dillon:
By williams lester accountants
28th Mar 2023 07:36

roger_dillon wrote:

I totally appreciate it and I dont want to use anyone’s time without paying for it. If you point out a link to me, I’m happy to schedule something formally

Here you go - https://www.icaew.com/about-icaew/find-a-chartered-accountant.

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Replying to roger_dillon:
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By petercooperuk
28th Mar 2023 11:48

The reason I asked is because broadly speaking, a benefit like a company car is considered to be remuneration. It's in a different shape than cash and has a different tax treatment, but it's still broadly remuneration (and those generous, for now, BIKs/company car taxes are essentially the "tax" you pay for that particular type of remuneration).

The reason this is important is because let's say you own a company where you do most of the work and you have a part time employee who does the books for an hour or two a week. If you were to give that part time employee access to a £80k Tesla company car and HMRC were to eventually come knocking (as unlikely as that might be), they might ask what justifies a £80k car + salary remuneration package for someone who does hardly any work.

The same thinking applies to you. If the company in question essentially profits and thrives through your hard work, contacts, or derring-do then you may very easily be able to justify a remuneration package involving a company car. I appreciate that may be quite a hard question to answer when it's essentially just holding an investment.

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Replying to petercooperuk:
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By roger_dillon
28th Mar 2023 11:56

That’s a very well answer thanks a lot

As recommended, I think I will pass all the facts to an accountant who can hopefully advise better. The company in theory holds one investment but as that investment provides income, there will be more investments to be made and i will be managing that. Whether that activity justifies a tesla, I think it’s the accountant who has to make the call

Another question: is it relevant that the company has no trading and therefore cannot use allowance initially? And once the investment incomes come, can the company offset allowance against investment income? (Or does it have to be trading income which company wont have)

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Replying to roger_dillon:
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By paulhammett
28th Mar 2023 13:07

Your new accountant will advise you on this and all other aspects.

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Replying to roger_dillon:
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By Hugo Fair
28th Mar 2023 13:48

"I think it’s the accountant who has to make the call"

Not actually the case ... the accountant should have the knowledge/expertise which, combined with the facts of your personal circumstances, will allow guidance to be given to you.
And, depending on the certainty of the facts and strength of conviction of accountant, he/she may refuse to act for you if you refuse their suggestions.
BUT legally it is *you* (not your agent) who makes any final decision - and who is on the hook if HMRC choose to dispute your version of any claim/submission.

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Replying to Hugo Fair:
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By roger_dillon
28th Mar 2023 14:20

Understand

I meant, accountant will advice considering all the facts, it’s up to me to implement it or not

Having said that, in case HMRC investigates, it should normally matter whether I relied upon advice or not, at a minimum to assess whether any mistake was a genuine mistake or not?

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Replying to roger_dillon:
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By petercooperuk
29th Mar 2023 11:09

If you mean "matter" in the sense that liability can be entirely passed on to a third party, it's extremely unlikely. Look at what happened to celebrities who indulged in what they believed to be legal tax "avoidance" (evasion) schemes.

If you mean "matter" in the sense that it could affect how HMRC or the courts treat you, then yes. Good faith efforts made by the taxpayer to act properly often act as mitigation. For any mildly ambiguous financial decision, I would always suggest anyone keeps a paper trail, has a reasonable justification, and feels confident they could defend their decisions with a straight face in an investigation. It might not get you out of trouble entirely, but such preparation can't hurt if anyone comes knocking.

As to your questions on whether the company's trading activity (or lack thereof) and investment income would justify the provision of a company car, I honestly don't know and this is certainly where that professional advice would come in handy. Good luck!

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Replying to roger_dillon:
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By I'msorryIhaven'taclue
29th Mar 2023 12:26

And if you mean "matter" in the sense of you plan to persist with asking the same question at free initial meetings until eventually an accountant tells you what you want to hear, be aware that a court/tribunal would take into account the expertise, standing, qualifications and experience, and even the cost to you of the advice of the accountant upon whom you may plan to rely.

So it's no good heading off to the pub to play beer for questions with retirees; no good asking at free "discovery meetings" with accountants, and not much good asking your trainee-auditor nephew.

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Replying to I'msorryIhaven'taclue:
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By roger_dillon
29th Mar 2023 17:35

So what is your suggestion? Book a reputable accountant expert in that field, ask the questions, have a call and have a memo written?

Anything else?

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Replying to roger_dillon:
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By Bobbo
29th Mar 2023 18:26

Would also suggest you keep a record of your time spent on company business (e.g. managing the equity investment, which admittedly probably won't be a great deal) to compare this and your statutory responsibilities as a director against the company's cost of providing a Tesla.

You referred earlier to using an allowance. If the company's only asset (other than a Tesla) if an equity stake in a business (assuming here by business you mean another limited company, but if not then please clarify this) surely its only investment would be dividends which are exempt from corporation tax?

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Replying to Bobbo:
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By roger_dillon
29th Mar 2023 19:11

Correct. Dividends from another ltd, so will be exempt from corporation tax

But reinvested funds income will be subject to tax, of course if they materialise in future

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Replying to roger_dillon:
By Ruddles
29th Mar 2023 19:31

roger_dillon wrote:

Correct. Dividends from another ltd, so will be exempt from corporation tax


Probably. But not necessarily.
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Replying to Bobbo:
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By roger_dillon
30th Mar 2023 12:54

On that point

A 60k tesla is roughly 1,200 taxable benefit right? assuming 2% BIK

So the question will be- whether 1,200 per annum is a fair remuneration for the director?

It obviously needs to be thought carefully but one would say 1,200 per annum is not a very high number to justify no matter how little work the director does. Many skilled employees can justify this with 5-10 hours of work

Obviously need to take into account things like insurance etc but my point is: we’re not talking about gifting a tesla to a director. Tesla remains company’s asset, the benefit, as calculated by hmrc guideline, is rather low?

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Replying to roger_dillon:
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By Paul Crowley
30th Mar 2023 14:10

Do not think taxable benefit
Think cost to the company
BUT if the company does not get any tax relief then chances are HMRC will not care
How is the company going to pay for the car?

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Replying to Paul Crowley:
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By I'msorryIhaven'taclue
30th Mar 2023 16:30

Paul Crowley wrote:

BUT if the company does not get any tax relief then chances are HMRC will not care

I was left wondering how any ECA is ever likely to be relieved.

If claiming 100% ECA would create a balancing charge further along the line when the EV is sold, then presumably you'd relieve that charge with the b/f and unutilised ECA.

In which event HMRC just might care. I guess it might be safer not to claim ECA in the first place, and perhaps even ignore any balancing allowance when the EV is sold. Just thinking aloud.

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