Company Car - Electric vehicle

Green&Red

Hi,
My wife's car is close to packing in.
As I understand it there is no BIK on electric cars. What are the tax downsides to buying one through my company? It seems like a no brainer which usually means I'm missing something!
Thanks

stoilkxor

would like to know more about this also. from what i gathered its a no brainer, but remember the no BIK will end 2022.

Rulmeq

From memory of researching this last year. The zero BIK only applies on the value up to €50k anything over that you pay as normal. And when writing off the cost of the vehichle in the company accounts it's capped at €24k (that figure depends on how eco-friendly it is, but EVs are eco, so that's grand), there's also the possibility of accelerating that (but you would need to talk to an accountant on that stuff). The one drawback that I did come across was that you won't be eligible for the grant to install the power point for the car in your home (I think you can get up to €600 if you buy privately)

Royale with Cheese

For BIK purposes the value of the car includes the €5000 VRT discount you get for buying electric, so anything over €45,000 will incur BIK. There is also an SEAI grant you get when buying an electric car privately of €5000, any price you see quoted for an electric car will already include this grant. You can't avail of this as a business customer (you could avail of a €3800 grant as a business purchaser up until last year but it's gone now), so you will be paying €5000 more for the car than a private buyer. It's also the value of the car when it was brand new that is used for BIK, if you buy a used Tesla for €45,000 that cost €100,000 when new 6 years ago then it's the €100,000 figure that's used when calculating the BIK on it.

As described above, the car is an asset and any money spent on it can't be deducted from your end of year profit. You can write off €24,000 instantly under the accelerated capital allowances scheme but anything above that amount you spent on the car will appear as profit in your end of year accounts and incur a corporation tax bill.

Calahonda52

Royale with Cheese wrote: »

..but anything above that amount you spent on the car will appear as profit in your end of year accounts and incur a corporation tax bill.

Can you flesh that piece out a bit please?

Royale with Cheese

Your end of year profit isn't just whatever money is leftover at the end of the year, it's calculated as your revenue less allowable deductions (basically salary + pension). If you make €100k in a year and pay yourself €50k and spend the rest on an electric car, your profit for the year is €50k. Accelerated capital allowances allows you to depreciate the car immediately by €24k, which goes into the book as a €24k loss and is deducted from the €50k. Your end of year profit then stands at €26k, 12.5% of that is €3250.

I believe there is also a clawback of the accelerated capital allowances should you subsequently sell the car for more than €26,000. If you sell it in three years time for €30,000 then €4000 will be added to your profit for that year and a subsequent corporation tax bill of €500 would be payable.

I should add I'm not an accountant and my own accountant was next to useless when it came to gathering this information, but I did a lot of research and the above was the conclusion I came to. I took the plunge on a Model 3 myself just before they nuked the €3800 grant last year, the whole thing was a little less attractive to me after that. There is a BIK bill of roughly €1200 annually on this car though, if you are happy to go with something that won't incur any BIK it's a lot more worthwhile.

Pawwed Rig

I am seeing a bit more pick up on electric vehicles this year than before. It is pretty much a no brainer if the company is providing cars to employees

Calahonda52

Royale with Cheese
okay, I see what you are at here.
Its not complicated.
In accounting there are 4 main heads:
Assets & Liabilities in the Balance sheet
Income and expense in the P&L
.
Asset purchases can never be expensed, in the year of purchase or otherwise, in the P&L
Assets are written off, by way of a depreciation charge. in the accounting P&L over their useful life.
Assets are written off, by way of a capital allowance charge. in the tax P&L over their useful life, or whatever rules the Revenue allow.
To get from Accounting P&L to tax P&L you add back the depreciation and deduct the CA

when there is a difference between the CA and the depreciation charge in any year, then this mismatch creates a deferred tax liability that need to be shown in the accounting P&L.
https://www.accaglobal.com/us/en/student/exam-support-resources/fundamentals-exams-study-resources/f7/technical-articles/deferred-tax.html

Any disallowable spend, either on assets or expenses, from untaxed income will always be taxed.
.
So there is nothing unusual about what you described in your first post.
.
I misread it as being related to purchasing an EV for over 50K:(

Homer

Anyone aware whether you can purchase a pre owned ev through the company?

Calahonda52

Homer wrote: »

Anyone aware whether you can purchase a pre owned ev through the company?

Yes
https://www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/private-use-of-company-cars/exemptions.aspx

argolis

I'm only just learning in this thread that the €3,800 company grant is now done away with, so I think I'm lucky I did this last year. Went from a Ford Focus (personal car) to an eNiro (company car). For like-for-like comparison, the numbers below are after tax i.e. as if I took the motor costs out of the company as income.

- I do about 25,000km. I estimated my annual running costs (Fuel, public charger usage, insurance, tax, tolls, parking, service costs, tyres) have gone from approx €3,700 to €1,060. If I also include depreciation, that'd go from €4,100 to €3,020. So still saving a chunk every year despite the much larger depreciation on the new car.

- If you only do 5,000km, the numbers are not so good and I'm not sure it's worth it as the fuel savings make a big difference to whether changing over is worth doing. Even with a cheaper EV, I think you'd be breaking even at best.

- No home charger grant, the company has to pay for that. Plenty of recommendations/links on the EV forum on chargers and installers

- You have to switch from personal car insurance to company car insurance. It can be tricky to get a quote, I found Kennco and Liberty the best to deal with. Not providers will take your personal NCB into account but these would. However, if you ever want to switch back to personal insurance, you have to start from scratch with your NCB (this is what every insurer told me, but there may be some that will recognise your company car NCB).

As was pointed out, you also have to balance any potential savings against how long you think the BIK exemption will last, which is anyone's guess. My own feeling at the time was that they'd extend it past 2022 because the government is so far behind on meeting its emissions requirements. If SF come in, maybe they'll do away with it because... companies...

You're then saddled with getting rid of the company car (although you can sell it out of the company to yourself once you have documented evidence of the car's value) and getting expensive personal insurance again.

Royale with Cheese

Calahonda52 wrote: »

So there is nothing unusual about what you described in your first post.

It's not unusual or specific to EVs, but I would wager many people thinking of availing of this scheme will be single employee proprietary director companies (like myself) and won't be used to declaring a profit or purchasing an asset of this value. Between the €5000 seai grant you won't get and the added corporation tax bill you wouldn't have otherwise paid, the €49,000 Tesla Model 3 will actually cost your company about €57,500. Still a lot better than paying for it out of your own money, but there is a price difference there. Any money I save by paying for running costs out of the company are negated by the BIK bill on the car too, but I didn't buy it to save money really :-)

The Niro looks like a very nice car, would definitely be my pick if I wanted to stay under the BIK limit. Unfortunately they're quite hard to get your hands on.