Tax benefits of electric car business contract hire
In this article we highlight the tax benefits of electric car (or van) business contract hire (BCH), an agreement between a company and a car leasing firm to lease any number of vehicles, and for electric cars or vans offers a number of tax benefits, due to low benefit-in-kind rates and refundable VAT on the lease.
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Benefits of electric car business contract hire
There are many advantages to electric car business contract hire. For example, costs are predictable and fixed each month. At the start of the contract a term, annual mileage and initial rental are set, and the car is chosen. Maintenance can be included also, while some companies will also offer insurance and smart charger installation as part of the package.
The savings with electric vehicles are considerable, the running costs or “fuel” cost being the main one. Charging at home using an EV-friendly, off-peak tariff can be as cheap as 5p per mile (as at February 2024). Which means a 50-mile trip can be done for just £2.50. And with diesel prices at about £1.50 per litre (as at February 2024) the same trip at 50mpg could cost about £6.83.
Tax benefits of electric car business contract hire
One of the biggest benefits of BCH for electric cars and vans are the considerable tax benefits of EV business contract hire.
- The monthly rental fee can be offset against the company’s taxable profit. And with an electric vehicle, there’s no taxation penalty for carbon emissions.
- If the car (or commercial vehicle) is used purely for business, 100% of the VAT on the monthly lease is refundable. It’s 50% if it is used for both business and the personal use of the employee. Cars normally get the 50% rebate, and vans or lorries the full sum.
- The VAT can also be reclaimed on the maintenance element of a BCH agreement if that’s part of the package. However, your business must be VAT registered.
- Additional fees, such as end-of-contract wear and tear charges or those for excess mileage can be offset against tax.
- You won’t have to pay company car tax if you’re a sole trader or have a Limited Liability Partnership (LLP).
- Running costs will be lower when travelling into Clean Air Zones (CAZs) as electric vehicles are exempt from charges.
Whether you’re upgrading your fleet or starting a new business and wondering how to provide your employees with vehicles. All in all Business Contract Hire for electric vehicles is worth considering.
Find out more about Business Contract Hire with ElectriX and CBVC.
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