is it time for an electric company car

Has the time come to have an electric company car?

With petrol prices at levels not seen before, even during previous oil and global crises, it comes as no surprise that the economics of owning an electric car are improving. But are there any other HMRC incentives that may ease the costs of purchase that individuals and company employees can consider in their calculations? It turns out that there are.

IsWhile this article will focus on the business considerations of electric vehicles, for the time being, it should be noted that the government is also offering purchase incentives to private individuals on new electric vehicles.

Price of electric vehicles are coming down and choices are expanding

Over the past couple of years we’ve seen the growing introduction of a range of electric cars, e-cars. New models and even completely new new manufacturers have appeared alongside new electrified versions from the well known car manufacturer brands. Until now they’ve been expensive to buy compared to their petrol drinking cousins. Although they still are comparatively expensive, they are getting cheaper as the technology matures, economies of scale improve and competition increases.

The government has for the past year offered favourable tax treatment on electric vehicles purchased for business use. This is set to continue, albeit at slightly reduced levels, but with other favourable market conditions factoring in, the company car is now an interesting prospect once again.

Tax in Benefits in Kind for company electric cars

  • 2021/22: 0%
  • 2022/23: 1%
  • 2023/24: 2%

 

Considerations when buying an electric car

Should I buy a new or used electric vehicle for business use?

Most of the benefit for a business buying an electric vehicle is achieved by buying a new vehicle. New electric vehicles qualify for 100% first year allowance (FYA). That means you can deduct the full cost of the vehicle purchase price from your profits - potentially a significant tax saving.

Buying second hand can still be advantageous, but the cost won’t receive the same FYA benefit. Currently, you’ll be able to claim 18% of the purchase price.

Can my business claim for electric vehicle charging points and electricity?

This is an interesting one. A business can claim a 100% first year allowance for installing new charging points at or close to an employee's place of work. This incentive is currently available until March 31 2023.

How a business chooses to let the employee use the charging point is also interesting.

Charging an electric vehicle at the place of work - private or company owned.

Currently, there is no chargeable benefit to an employee if the company allows them to recharge their own vehicle (private use) at their place of work. This is because electricity isn’t considered a fuel. If it were, simply charging your phone or a laptop might be a chargeable benefit. This is a similar treatment to that of tax free car parking. Naturally, an employee cannot claim for recharging their personal vehicle from other locations, such as a service station.

Charging at third party charging points

Similarly, if an employer pays for the cost of charging a company owned electric vehicle at other locations, there is no chargeable benefit, again because electricity is not considered a fuel.

If an employee pays to recharge a company vehicle from a third party source such as at home or a service station charging point, they can make a claim of 4p per mile.

Can I lease an electric vehicle and claim similar benefits?

Yes, but there are a couple of points to note here. The type of contract is important. Only operational lease contracts are able to qualify for full relief on rental payments. Operating leases differ from the other type of lease - typically a personal contract purchase (PCP), in that once the operational contract ends, the vehicle concerned is simply returned to the lease company. In short, there’s no ownership.

Can I claim back VAT on an electric vehicle purchase?

The answer is yes and there’s no difference here to that of a business buying a regular vehicle. The catch though, is that it must be for 100% business use. HMRC will likely ask you to prove this too, which is notoriously hard to do. if the vehicle is used by employees for personal reasons, then only 50% can be claimed.

The other point to note is that this only applies to vehicles that are classified as low emissions - less than 50g/km CO2. Not a problem for an electric vehicle and the business can claim full relief on rental payments. Above this figure though, only 85% can be claimed.

What can I claim if I used my personal electric vehicle for business use?

Since it became unattractive to have a company car, many people use their own vehicles for business use from time to time. As such regular vehicle owners have been able to make an expense claim for mileage use. If you use your electric vehicle for business use, the rates are exactly the same. The normal tax free mileage allowance is 45p per mile  up to 10,000 miles, thereafter 25p per mile.

What about the benefits of electric vans?

Many small business owners and self employed people can benefit here by being an electric van as opposed to a ‘car’.

A van is different from a car because its sole purpose is trade or business related. Also, it qualifies for the same FYA as electric cars do. Accordingly, a van can be used from both business and private use, without the employer or employee incurring a benefit in kind.

What are ‘super-deductions’ and do they apply to electric vehicles?

Super-deductions were announced in the March 2021 budget and relate to ‘qualifying assets’. A super-deduction 130% FYA can be deducted on the full cost of such assets.

But what are qualifying assets? Where electric vehicles are concerned, they are not qualifying assets, which are normally assets acquired to carry on a trade - e.g. office equipment, machinery, computers, etc. Cars are not treated as ‘main pool’ plant and machinery and thus do not qualify for capital allowance purposes.

The good news though is that if your business plans to install charging points for company electric vehicles, these do qualify for a super-deduction of 130%. In other words, for every £10,000 spent, your business can claim back £13,000.

This benefit lasts through 31 march 2023.

What government grants and schemes are currently available ?

Buying an electric vehicle through an employer’s salary sacrifice scheme.

This represents a method by which an employer can offer an employee an electric vehicle in a cost-neutral way through salary deductions. This takes advantage of the employer’s VAT deductions and the employee’s ‘pre-taxed’ salary. This is no different from the way a company may attract top talent by offering healthcare, gym membership, childcare, etc. It is an attractive option because it reduces the employee’s overall taxable income. In some circumstances it could move an employee into a lower tax band.

However, while still an attractive scheme, the government made changes in the scheme in 2017. Since then an employee is required to pay income tax on the value of the car or the amount of salary sacrificed. Those employees on salary sacrifice schemes prior to April 2017 lost this income tax allowance in April 2021.

Fully electric cars however, renew the attractiveness of this scheme as the incentives for electric vehicle purchase and company use remain. The grants offered though only apply to vehicles with a purchase price of less than £32,000.

Here are a few examples. Note these are based on ‘no salary sacrifice scheme implemented’.

Higher value vehicle examples

Example: A regular petrol vehicle

  • Purchase price: £45,000
  • Engine size and CO2: <1400cc)- 125g/km
  • Car benefit charge : £13,050
  • Tax liability:  20% = £2610, 40% = £5220

Example: Similar value e-car

  • Purchase price: £45,000
  • Car benefit charge - £450
  • Tax liability - 20%=£90, 40% = £180
  • Government grant: Does not apply.

Typical lower cost cars

Example: Fully electric:  e.g. Vauxhall Corsa-e

  • Purchase price: £25805 inc options
  • Car benefit charge - £258
  • Tax liability - 20%=£51.6, 40% = £103.20
  • £1500 government grant

Example: Regular petrol Cosa  (<1400cc - 125g/km)

  • Purchase price: £16,445
  • Car benefit charge - £4769
  • Tax liability - 20%=£953.80, 40% = £1907.60

Other grants available

For vans

  • A grant of £3000 available for small vans up to 2500kg.
  • A grant of £6000 for vans between 2500kg and 3000kg.

Homecharge scheme

  • Employees can make use of the Electric Vehicle Homecharge scheme. This provides 75% towards the cost of and installing a single charge point, up to a maximum of £350 per household per eligible vehicle.

Road tax

  • Electric cars are exempt from road tax
  • Hybrid  vehicles are taxed between £0 and £135 per year depending on CO2 emissions.

How tax Agility can help your business navigate the electric vehicle opportunity

We’ve been assisting small businesses and the self-employed in and around Richmond and Putney for many years. We’re intimately familiar with the issues faced by businesses looking to offer benefits to their employees in a tax efficient manner and also improving the business’s own tax efficiency.

E-vehicles are or have come of age, depending on your point of view. However, there’s no denying that at present there are some significant attractors to a business (or individuals) purchasing a new electric vehicle for business use. We can help you assess the value and benefit to your business, as each business is different.

Call tax Agility today and talk to us about electric vehicle ownership and how it can benefit your business.


reporting irish income from property in the UK

UK tax on Irish rental income

An Irish citizen working in London is asked by HMRC to declare her rental income from Ireland

The Republic of Ireland is a short hop away from London and has a long-standing Common Travel Area (CTA) arrangement with the UK. Under the CTA, Irish citizens can live and work in the UK without a visa, residence permit or employment permit. This ease of movement may explain why many Irish citizens are working in London and contributing to the UK’s economy.

reporting irish income from property in the UKWhile some Irish citizens may end up putting their roots down in the UK, others still prefer to retire in the Emerald Isle someday in the future. And considering the property market in Ireland is booming, it is not uncommon to see savvy investors getting a buy-to-let in Ireland now with the aim that they may move into the property later.

Mary, our client, was doing just that. She purchased a lovely family home in a tree-lined residential street in Dublin a few years ago and now rents it out while she works in London. In the UK, she is on PAYE and in Ireland, she files the relevant Irish tax return each year. To Mary, her financial affairs are rather straight forward and there is no need to do additional reporting. Unfortunately, HMRC sees it very differently.

Declaring a rental in Ireland to HMRC

It is important to point out that every case is different and that you should always seek professional advice from a personal tax accountant first. In the case of Mary, the rental profits that she gets from renting out her Dublin property is subject to the Irish tax. However, Mary is also a tax resident in the UK and therefore, HMRC believes she should have declared her rental income from Ireland.

Declaring your overseas income may not result in you paying tax twice, but not declaring it may see you fined and penalised. Whether or not one has to pay tax twice on the same income source depends on the existence of a double-taxation agreement between the country of your foreign income and the country where you are a tax resident. In this case, Ireland has a double-taxation agreement with the UK and one should not be paying tax twice on the same income source.

Worldwide Disclosure Facility (WDF)

HMRC launched the Worldwide Disclosure Facility on 5 September 2016. The idea behind this is to encourage UK tax residents who have foreign sources of income to disclose them voluntarily. Considering that over 100 countries now share and exchange information under the Organisation for Economic Co-operation and Development’s Common Reporting Standard (CRS), the WDF should help to increase international tax transparency.

If you have foreign interests, chances are you need to make a disclosure through the WDF, and preferably you do it before HMRC sends you a letter. Not declaring may put you in an unfavourable position, as HMRC may think that you’re negligent or worse, you choose to conceal your foreign income deliberately.

If you aren’t sure if a disclosure is required, talk to our qualified personal tax accountants. You can choose to work with us and we can review your specific circumstance and make the best recommendations.

Examples of tax liabilities that you need to declare

  • Income from letting residential property or land
  • Capital Gains from assets that increased in value between the time you bought them and the time you sold or transferred them
  • Income from running a business
  • Income from freelance or commission-based work
  • Income from accepting credit card or debit card payments
  • Investment income
  • Any other income that you should have paid tax on

Call Tax Agility on 020 8108 0090 about disclosing your foreign income on the Worldwide Disclosure Facility today.

Becoming your tax agent for Worldwide Disclosure

When Mary came to see our personal tax accountant, she was at a loss and naturally worried that she might be penalised financially. We worked with her to understand her circumstance and became her tax agent, representing her and helping her complete forms and calculate tax credits – in this particular case, since Mary has paid tax in Ireland, she was entitled to a credit which reduced her UK tax liabilities.

Upon seeing our work, Mary subsequently engaged us to handle her Self Assessment whereby we advised her how much tax to pay and when, if a tax credit is applicable, and prepare and submit her SA100 personal tax return to HMRC.

Personal tax accountants at Tax Agility

Tax issues can quickly become more complicated when you start to report foreign income to HMRC. Concerns such as one's domicile, the difference in tax year, or if double-taxation is applicable are valid and should be addressed professionally.

Thankfully, our personal tax experts are here to assist. Our top advice is don’t wait for HMRC to send you a letter. Instead, be proactive and let us understand if your tax affairs need to be disclosed through the Worldwide Disclosure Facility (or not).

Should a disclosure be needed, we can help to register you, prepare and submit your disclosure, work out how much tax, interest and penalties you may need to pay, and negotiate a payment arrangement if it is required. Working with you every step of the way, we can help ensure that you aren’t paying more than you should, and the disclosure matter will be completed quickly, efficiently and professionally.

Call us today on 020 8108 0090 and speak to a knowledgeable tax specialist in either our London Richmond-Upon-Thames office or our London Putney Office.


HMRC Foreign Income Disclosure

Case Study: When HMRC asks about your foreign income

The UK has Automatic Exchange of Information agreements with over 100 countries, so HMRC knows if you have declared your foreign income or not.

According to the UK Parliament, there were 6.2 million people (9% of the total population) living in the UK who had another nationality. Within our Central London, Putney and Richmond offices, we also have foreign-born colleagues who had previously worked in another country. With international migration now a common trend, it is not uncommon to see some people struggling with foreign tax issues, particularly when they thought they had reported in another country but received a letter from HMRC pertaining to the overseas income.

HMRC Foreign Income DisclosureOne of our clients, Victor from Richmond-Upon-Thames, had previously lived and worked in Singapore for a decade, during which time he acquired some shares and a few assets. When Victor came to work in London, he didn’t pay much attention to his tax affairs as he is on PAYE. It also didn’t cross his mind that he had to report the small (and irregular) income he still receives and remains in his bank account there.

But one day Victor received a letter from HMRC about his foreign earnings which he had not reported in the UK. Panicked, Victor came to our Richmond-Upon-Thames office and asked for our help. Our personal tax accountants  analysed Victor’s position and advised on the correct remedy to rectify his tax filing requirements. Seeing how swiftly we acted and provided him with a satisfactory result, Victor has now engaged us to report his future foreign income through Self Assessment tax return service.

Worldwide Disclosure Facility (WDF)

If you have foreign interests, chances are you need to make a disclosure through the WDF, and preferably you do it before HMRC sends you a letter. If you aren’t sure if a disclosure is required, talk to our qualified personal tax accountants. We can review your specific circumstance and make the best recommendations.

The WDF users

HMRC wants anyone needing to disclose a UK tax liability that relates wholly or partly to an offshore issue to use the WDF. An offshore issue includes unpaid or omitted tax relating to:

  • Income arising from a source in a territory outside the UK
  • Assets situated or held in a territory outside the UK
  • Activities carried on wholly or mainly in a territory outside the UK
  • Anything having effect as if it were income, assets or activities of a kind described above

The WDF should also be used when you have funds connected to unpaid or omitted UK tax that you have transferred to a territory outside the UK or are owned in a territory outside the UK.

Examples of tax liabilities that you need to declare

  • Income from letting residential property or land
  • Capital Gains from assets that increased in value between the time you bought them and the time you sold or transferred them
  • Income from running a business
  • Income from freelance or commission-based work
  • Income from accepting credit card or debit card payments
  • Investment income
  • Any other incomes that you should have paid tax on

Call Tax Agility on 020 8108 0090 about disclosing your foreign income on the Worldwide Disclosure Facility today.

The WDF process

To use the WDF process, you must first register and HMRC will issue you a unique disclosure reference number.

After the registration process, you have 90 days to:

  • Gather the information you need to fill in your disclosure
  • Calculate the final liabilities including tax, duty, interest and penalties
  • Compete the online form

As the WDF process may not be straightforward, we do encourage those who have foreign assets to come to us for professional advice first or allow us to file on behalf of you.

Don’t underestimate the implications

HMRC wants to send a strong deterrent message to those who don’t disclose their foreign assets. Accordingly, if you fail to make an accurate disclosure or refuse to provide supporting documents allowing HMRC to check the accuracy, you may receive a higher penalty and have your details published on the gov.uk website. Also, HMRC may choose to launch a civil or criminal investigation against you. To save yourself from the headache and unwanted attention, it is best to speak to our qualified personal tax accounts first.

Personal tax accountants at Tax Agility

Tax issues are never straightforward and things can get complicated quickly if you have foreign assets which you may not know that you need to declare and pay tax on.

Fortunately, our personal tax accountants are here to assist. We will first seek to understand your tax affairs and identify what needs to be disclosed through the Worldwide Disclosure Facility (or not).

Should a disclosure is needed, we can help to register you, prepare and submit your disclosure, work out how much tax, interest and penalties you may need to pay, and negotiate a payment arrangement if it is needed. Working with you every step of the way, we can help to make sure that you aren’t paying more than you should, and the disclosure matter will be completed quickly, efficiently and professionally.

Call us today on 020 8108 0090 and speak to a knowledgeable tax specialist in either our London Richmond-Upon-Thames office or our London Putney Office.