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Electric Cars FYA

Capital allowances on PCP

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There are an ever increasing no. of clients investing in EV's due to the tax savings and minimal BIK. Some of these cars are c. £100k. 

I have read numerous threads on here, other articles and the legislation and am still a little unsure if the treatment of cars 'purchased' on a business contract purchase deal (company equivelant to PCP) would qualify for the 100% FYA for CA purposes. 

These finance deals typically work as follows for a £100k car:

Deposit £10k

Monthly payments over 4 years £1k pm

Balloon payment £50k

The factors I am considering (and making me change my mind every five minutes are)

No VAT is charged on monthly payments (although this does go against the recent Merc case) 

The final payment appears to intentially represent the estimated MV at that point and I thought that in order to claim CA's the final payment had to be set at an amount lower than the expected MV. However, the flip side to this is surely the lessee carries risk here in that the company could have equity in the car at this point or negative equity - you wouldnt carry this risk on a contract hire/rental arrangement

A contract hire arrangement is purely a rental and offers no opportunity of purchasing the car. The monthly payments on these compared to the above are very similar.

In reality the tax difference overall is just a timing difference between up front tax relief (and possible clawback on sale) against tax relief over the term of the lease. The clawback part is mitigated with a similar car being purchased upon the sale of the existing. 

Has anyone had any recent experience with HMRC on this matter in terms of a corporation tax enquiry or happy to offer their thoughts?

 

 

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By Lordoflords7
17th Oct 2021 18:58
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By Jigs
17th Oct 2021 20:00

Thank you, but yes that is one of the ones I have read!

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By Alex Perkin
17th Oct 2021 21:39

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