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Software upgrade for a company car

Considering autopilot software update on company purchased Tesla Model 3 used by a director.

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Hello, firstimer here,

We purchased a car for use of one of the directors (base Tesla Model 3) in March this year and we are considering to use Tesla's limited time offer for "Enhanced Autopilot". This is a £3,400 software upgrade. The main reason is that it in our eyes feels like a good deal and it improves the safety of the car.

Is this treated as accessory? We don't consider it as a nice feature but really one that improves the safety... How would HMRC see it?

How shall be such a purchase treated? 
- is it VAT expense?
- is this going to be BIK?
- does this increase purchase price of the car and therefore impact employees BIK however currently at 0%?

Thank you,
Peter

Replies (12)

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By WhichTyler
28th Sep 2020 13:45

Sounds to me like it follows the treatment of the car itself if it's a one off purchase

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By Peter83
28th Sep 2020 14:22

Thank you @WhichTyler. I would agree that it feels sensible though I have not come across of it yet.

At the same time, I would have tendency of treating it as an accessory as I have not found any reference anywhere on change of list price of vehicle?

Any other thoughts? Thanks

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Replying to Peter83:
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By Anonymous.
28th Sep 2020 15:26

Peter83 wrote:

Any other thoughts?

Your company must have an awful lot of money if it can contemplate chucking £3k+ at this. If I bought a [EDIT: apparently minimum £40k] car that needed a £3k enhancement on "safety" grounds, I'd be taking it back.

Have a look at this:

https://www.gov.uk/guidance/how-to-work-out-the-benefit-of-a-company-car...

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Replying to Anonymous.:
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By Peter83
28th Sep 2020 16:17

The company is not doing bad but hopefully that is not the decision making factor :) Saying that it is not my decision but the decision of the directors. BTW: It was £39,490 :D

Those are extra features that could have been purchased at the offset (exact package was not available) but at that time they've considered the base model would do.

Thanks for the link. I have been there before, however, not sure how exactly software fits into the picture. Treating it as any other accessory, 12.11 (b) would apply as it is an "accessory", price of which was not available before but is available now. Then also 12.12 would apply as the car itself was acquired in the previous financial year...

Or 12.13 as the car has a "basic" autopilot and this is an "enhanced" autopilot. But either way it probably leads to the same result.

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By petercooperuk
28th Sep 2020 16:41

I would argue it does not increase the value of the car because Tesla have said they remove it if you sell the car on: https://www.theverge.com/2020/2/6/21127243/tesla-model-s-autopilot-disab... .. which might make me want to treat it as a licence for software or as a service rather than as a tangible accessory.

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Replying to petercooperuk:
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By Peter83
28th Sep 2020 17:05

A good remark. Thanks @petercooperuk

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By The Dullard
28th Sep 2020 17:00

Satisfies the definition of accessory to my mind, whether or not it adds any value to the car.

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By leveni
30th Sep 2020 09:52

Tesla do not remove the autopilot upgrade if you sell the car so it does enhance the value. The exception to this is if you buy a second hand car directly from Tesla and the previous owner had paid for Autopilot it will not be active unless you also pay for it.

In the article on The Verge, the dealer bought the second hand car from Tesla but they had failed to deactivate autopilot initially. They subsequently deactivated it.

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Ivor Windybottom
By Ivor Windybottom
30th Sep 2020 09:56

Great question!

I wonder whether it's worth seeing if ICAEW or similar will take it up with HMRC, as it is clearly a new technology issue that the old BIK rules did not envisage and it would be great for everyone to have clarity.

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Replying to Ivor Windybottom:
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By Peter83
30th Sep 2020 10:05

I couldn't agree more. New technology and new approach of doing business. It is funny to think that the car has many features installed already and enabling them is a software function rather than anything else.

An extreme to it - the basic model has heater integrated in the rear seats. But it is not included in the base price and you can activate it for a fee. One could argue it is a service not and equipment as it was already installed :)

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By [email protected]
30th Sep 2020 13:14

In my opinoin It would be an accessory and have to be treated as such
If it were a safety issue then Tesla would be obliged to recall the cars affected to rectify

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Replying to [email protected]:
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By Peter83
30th Sep 2020 13:22

I don't disagree but just to clarify - not a safety issue but improved safety. Having a smarter car that avoids potential collision, etc.

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