Buying an Electric Vehicle | Tax Advantages | Professional Contractors

Buying an Electric Vehicle | Tax Advantages for Professional Contractors 

If you wish to purchase an Electric Vehicle through your limited company, the below tax advantages will apply. 

Zero Benefit in Kind

Benefit in Kind is a tax charge on an Employee or Director when they have use of a company vehicle.  It is calculated by taking the Original Market Value (OMV) of the Vehicle and multiplying it by a precentage depending on the type of vehicle and mileage. The top rate is calcaulted at 30% . For vehicles purchased before Dec 2019 the reduced BIK will apply up to December 2021. This is expected to be extended in Budget 2020

For Electric Vehicles BIK is 0% where

(i) Original Market value is €50,000 or less OR

(ii) You have use of car between 10/10/2017 and 09/10/2018

If neither of above are applicable to you, then you will only get partial exemption, i.e. you must reduce the OMV (Original Market Value by €50,000) 

BIK Examples 

Electric Car purchased new with OMV of €40,000 - BIK= 0 

Electric Car purchased 01.01.2018 for €100,000 - BIK = 0 

Electric Vehicle purchased 01.01.2019 for €80,000 

Claiming Tax relief on Purchase Price of Electric Vehicle

Where a vehicle is purchased through your limited company, you may claim tax relief on the cost of the purchase. 
 
However, for passenger vehicles including electric cars,  this is restricted to €24,000. 

Normally you write off 12.5% per annum over 8 years, i.e €3,000 per annum. 
With Electric Vehicles you have to option to accelerate the write off, this would mean claiming the full €24,000 in Year 1. 

The balance of €16,000 is not treated as an allowance against corporation tax. 

You can still use company funds to pay the full €40,000, however you will have a Corporation Tax charge of €2,000 (12.5% x €16,000) in Year 1 and Zero Corporation Tax in the following year.

Lease or Buy

Should you lease a vehicle, the lease costs will be written off over the term of the lease whereas if you purchase outright it will be written off as above.

The €24,000 limit still applies. In the case of Electrical Vehicle, it may be more efficient to purchase outright or through a normal loan. 

For further information contact Icon Accounting's Advisory Team | 01 8077106 | info@iconaccounting.ie