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JohnC

We're all going electric

I have a client with 3 directors who always enjoyed their cars. The current cars are a 435i an S6 and a fully loaded petrol Evoque.

I got a call today to say they were changing their cars and could I work out the savings in Benefit in Kind from the new Hybrid vehicles: 2 X5 Hybrids and an XC90 Hybrid.

The savings are certainly worth having even with the higher list prices of the new vehicles - an annual saving of about £3,500 per car! And Government don't believe that tax policy changes human behaviour!
gonnabuildabuggy

Re: We're all going electric

JohnC wrote:
And Government don't believe that tax policy changes human behaviour!


I'm sure they don't believe that. The only problem is when it becomes too effective.

Interesting they take them as company cars, I assume they don't do enough paid mileage to make it worth taking them as private cars and expensing them or are they not the business owners?

OOI what's the BIK on an X5 Hybrid? Curious to see if worth considering?
Michael

Have they tested the X5? I haven't driven one of the new ones but in tests the Volvo has the better powertrain. I did like the one I borrowed and wouldn't feel short changed with one of those over any X5.
JohnC

They are Directors who all do about 20,000 miles a year with at least half of that private, so paying for the car privately and getting only c£4,000 back in mileage isn't going to cut it.

The X5 Hybrid isn't as good as the XC90 in BIK percentage but it is a cheaper vehicle. The BIK percentage is 11% this year and 13% next year on a list price of c£60,000 if you add a few extras (basic list of MSport is around £56K I think). For next year that gives a BIK of £7,800 for the car which costs £3,120 at 40% tax.

The Volvo is costing nearer £66K with a BIK this year of 7% increasing to 9% next year, making the BIK next year £5,940 which would cost £2,376 at 40% tax.

The monthly payments on the BMW are about £200 less a month because there is some discount on the X5 but nothing on the XC90 and net of discount the difference in price is over £10K.
JohnC

Michael wrote:
Have they tested the X5? I haven't driven one of the new ones but in tests the Volvo has the better powertrain. I did like the one I borrowed and wouldn't feel short changed with one of those over any X5.


They did but the only comment I got was that the Government were spoiling everyone's fun but at least it would be easier to get the golf clubs in to it. The ex S6 driver is the one getting the Volvo and he is the real petrolhead.
gonnabuildabuggy

Are the Hybrids also cheaper for the company?

I always figure a lease car is costing me twice - lost profit to the company (though a tax saving), plus the BIK so most people I know who run their own companies just expense their cars and cover the lease and petrol costs through mileage.
PhilD

Re: We're all going electric

JohnC wrote:
And Government don't believe that tax policy changes human behaviour!


Where have you got that idea from? Governments/leaders have used taxation to change behaviour since time immemorial.
PG

If they are petrolheads, why don't they do the sensible thing and †-

Take a large allowance (lease value of a car plus tax and insurance for example). Yes it has NI on it but so does BIK now. The allowance is 100% corporate tax deductible. They pay tax on the allowance, but they save the BIK.
The company pays all their petrol / diesel. As they do not have a company car, there is no fuel scale charge - it just goes on the P11D as "mileage allowance". So they pay tax on it. †Company gets 100% tax deduction on this as well.
On their tax return each year they claim 10,000 business milesat 45p per mile for the 10,000 miles. This offsets some / all of the tax due on the fule depending on how that works out.  

We moved all our UK employees to this some years ago (as our US parent hates company cars). We do put limits on fuel claims (so that everybody does not run a big petrol FOC...). After some initial resistance, everybody likes the scheme.

For example rather then running a 2.0 diesel or hybrid anbd be obsessed about BIK levels, I top up my allowance and fuel limit and it allows me to run the XFR.
Big Blue

Re: We're all going electric

PhilD wrote:
JohnC wrote:
And Government don't believe that tax policy changes human behaviour!


Where have you got that idea from? Governments/leaders have used taxation to change behaviour since time immemorial.


Yeah I was a bit surprised at that comment.
JohnC

Re: We're all going electric

PhilD wrote:
JohnC wrote:
And Government don't believe that tax policy changes human behaviour!


Where have you got that idea from? Governments/leaders have used taxation to change behaviour since time immemorial.


Government have on numerous occasions commented that there were unintended consequences from tax changes which they would now need to address - Gordon Brown expressed astonishment that so many people switched from being a sole trader to being a limited company when he introduced a zero rate of Corporation Tax for the first £10k of profit: that apparently was never the intention, it was meant to boost small companies! 5 minutes after that change was announced we were incorporating clients!

Legislation makers didn't see the big switch to diesel when they started to make CO2 the measure for car benefits in kind. It was marketed as an environmental change but 30 seconds with a calculator told most people that it was another cash grab so they changed habits and Politicians squealed.

Dividends in small companies were never intended to be taken instead of salaries - they have had 20 years trying to chase that one after good old Gordon dispensed with the tax credit on dividends and did away with the need to complete a form CT61 when a dividend was paid. Now many people plan retrospectively with dividends even though it is technically illegal.

I could go on and on.

Politicians are blind to the options available to taxpayers when they introduce something new - they think they can legislate in a vacuum.
Racing Teatray

The issue with hybrids is finding one which is based on a car you actually want rather than merely need. I have no desire or need for a giant SUV

I could have been tempted by a BMW Active 3 hybrid had they done it as a Touring, since it had a proper engine. But the new 330e is a four-cylinder and I didn't fancy that at all.
PhilD

Being blind (wilfully or otherwise) to certain consequences is not the same as not believing that policy changes behaviour. In fact, in both the examples you have given above you state the intended change!
JohnC

PhilD wrote:
Being blind (wilfully or otherwise) to certain consequences is not the same as not believing that policy changes behaviour. In fact, in both the examples you have given above you state the intended change!


Yes but if you smack someone in the face with the intention of ending the argument in your favour and then waken up 2 days later in hospital with no teeth, it just goes to show that you didn't consider all the possible outcomes or even their likelihood - that, in pub terms would just show that you were a f8cking idiot. And Politicians seem quite capable of such decision making on a daily basis.
PhilD

JohnC wrote:
PhilD wrote:
Being blind (wilfully or otherwise) to certain consequences is not the same as not believing that policy changes behaviour. In fact, in both the examples you have given above you state the intended change!


Yes but if you smack someone in the face with the intention of ending the argument in your favour and then waken up 2 days later in hospital with no teeth, it just goes to show that you didn't consider all the possible outcomes or even their likelihood - that, in pub terms would just show that you were a f8cking idiot. And Politicians seem quite capable of such decision making on a daily basis.


Is that a threat?  

Anyway, I agree with everything you have said after the original post so it's all good.
JohnC

PG wrote:
If they are petrolheads, why don't they do the sensible thing and †-

Take a large allowance (lease value of a car plus tax and insurance for example). Yes it has NI on it but so does BIK now. The allowance is 100% corporate tax deductible. They pay tax on the allowance, but they save the BIK.
The company pays all their petrol / diesel. As they do not have a company car, there is no fuel scale charge - it just goes on the P11D as "mileage allowance". So they pay tax on it. †Company gets 100% tax deduction on this as well.
On their tax return each year they claim 10,000 business milesat 45p per mile for the 10,000 miles. This offsets some / all of the tax due on the fule depending on how that works out. †

We moved all our UK employees to this some years ago (as our US parent hates company cars). We do put limits on fuel claims (so that everybody does not run a big petrol FOC...). After some initial resistance, everybody likes the scheme.

For example rather then running a 2.0 diesel or hybrid anbd be obsessed about BIK levels, I top up my allowance and fuel limit and it allows me to run the XFR.


I have had that discussion but they don't want to bite. They make shed loads of money and for them it is just easier to run it all through the company. However like many people they feel they (and they do) pay lots of tax and like the idea of a car which costs them less to the taxman.
JohnC

PhilD wrote:

Is that a threat? †



No that's not my style.....I just make a phone call!
gonnabuildabuggy

JohnC wrote:
I have had that discussion but they don't want to bite. They make shed loads of money and for them it is just easier to run it all through the company. However like many people they feel they (and they do) pay lots of tax and like the idea of a car which costs them less to the taxman.


I don't get this.

They are happy to pay more tax to run flashy cars through the company rather than the "hassle" (which I can't see it is) of giving themselves an allowance and running the cars themselves?

They'd rather trade down (as such) to hybrids to save tax rather than just restructure the payment method for the cars?

The only other factor I can see is "fairness" as if they company provides cars for employees then it might be deemed unfair that directors get an allowance whilst employees can't.
TreVoR

The HMRC only cover car expenses for a limited amount, which won't cover the costs. Any extra  paid to cover the costs is subject to tax and NI is my guess.
JohnC

I haven't done the sums (and I don't intend to because it can become seriously complicated) but I don't think there will actually be a big difference in total cost one way or the other. Some people just like to do things in certain ways and you just learn to let them unless the differences are significant.

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