Understanding Capital Allowances for Electric Company Cars

Do I Need to Adjust Capital Allowances on My Electric Company Car for Private Use?

When claiming First Year Allowance (FYA) at 100% for an electric company car, there’s a key distinction based on business structure:

Sole Traders and Partnerships:

Restricted Claim:

If you’re a sole trader or a member of a partnership, you’ll need to restrict your Capital Allowance claim to reflect the business-only usage of the vehicle. This means you can only claim a portion of the allowance based on the percentage of time the car is used for business purposes.

Limited Companies:

Full Claim:

Unlike sole traders and partnerships, limited companies can claim 100% of the Capital Allowance on an electric company car, regardless of private usage. This means you can deduct the full cost of the vehicle from your taxable profits in the first year.

Important Note:

While limited companies can claim the full FYA, it’s essential to remember that private use will still be subject to Benefit-in-Kind (BIK) taxation. This means that the company will need to pay Class 1A National Insurance Contributions (NICs) on the taxable value of the BIK.

To ensure compliance with tax regulations and avoid potential penalties, get in touch with our team!”

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Accountants in Haslemere, Surrey

We are qualified accountants providing personal and professional services for start-ups, established companies and individuals in and around the Haslemere area in Surrey. With the rise in technology, we have embraced the digitisation of accounting using efficient digital accounting tools to offer reliable services to our customers. Our goal remains to get our clients the best accounting and taxation services at the most affordable rates.

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The provision of food and drink to an employee by their employer is a lovely thing to do. Eventually, it promotes teamwork, loyalty, a sense of belonging and even improves productivity. Taking it at face value makes it look like a simple act of kindness. However, unless it is done correctly, it can cause tax and national insurance compliance issues for the employer.

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Information provided on the site is merely guidance that may change in line with UK law and regulations. Users must not consider this to be financial advice or their sole resource when making any financial decision. Spondoo is a trading name for Accounting SQL Limited, authorised & license accounting firm under the Institute of Financial Accountants.

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