Well I’m sure for many of you today is a big day as children return to school and we begin the slow transition back to normal life.
If you require further explanation on any of the topics in todays newsletter then don’t hesitate to get in touch. Our contact details are at the bottom.
Todays topics include:
Super Deduction 130% Corporate First Year Allowance
Electric Switchover – The benefits
In my previous newsletter dated 01/03/2021 I shared with you some benefits of electric cars for your business. I want to revisit that as there is still more to say on the matter.
The Corporate Super Deduction Allowance (SDA) – 130%
What is it?
- It is a 130% first year allowance deduction for expenditure incurred in purchasing plant & machinery (P & M) that would normally qualify for main rate writing down allowance of 18%.
When can you claim it?
- You can claim it for expenditure incurred on or after 1st April 2021 up to and including 31st March 2023.
When is the expenditure deemed to be incurred?
- The general rule is that an amount of capital expenditure is to be treated as incurred as soon as there is an unconditional obligation to pay it.
What constitutes qualifying P&M?
What is allowed are assets which would normally attract the writing down allowance of 18% or historically the 100% Annual Investment Allowance. Possible examples include;
- zero emissions goods vehicles, or
- new plant, machinery or equipment acquired by a Small and Medium sized Company.
- Driving instructor cars with dual control, black cabs, double cab pickups with a payload of one tonne or more – as long as the Co2 emissions do not exceed 50g/km
What does not constitute qualifying P&M?
- Second hand assets.
- Cars other than those already stated.
- Long life asset expenditure.
- Connected party transactions.
- The expenditure incurred on the provision of plant or machinery for leasing.
- Any expenditure incurred on an asset which would attract the special rate writing down allowance of 6%.
Things worth noting
- Do not buy any assets prior to 1st April 2021
- If the asset is deemed to have been disposed of (e.g. sold, destroyed and insurance monies received, no longer used in the trade etc.) then a balancing charge could arise on disposal.
- If the asset is deemed to have been disposed of anytime up to and including 31st March 2023, then the disposal value to be used would be increased by a further 30%. Planning point – where feasible stave off the disposal until after 31st March 2023.
- If accounting year in which the expenditure is incurred straddles the 31st March 2023, then the SDA is apportioned. Planning point – perhaps consider changing the year end to before 1st April 2023.
Electrical Switchover- The Benefits
- There is a Government ‘plug in’ grant of up to £3,000 or 35% of the purchase price if lower, off the cost of acquiring a new car with CO2 emissions of less than 50g/km. It must have an electric mileage range of 70 miles or more and the recommended retail price (Including delivery fees and VAT) is less than £50,000.
- The car benefit charge for a pure electric car for the 2020/21 tax year is nil. For the 2021/22 tax year it will be 1% of the list price (2% for 2022/23 – 2023/24 inclusive 2%).
- If an employee has a company car provided by their employer under a salary sacrifice arrangement, the taxable benefit is usually the higher of the salary given up or the taxable car benefit. This is not the case if the company car has CO2 emissions of less than 75g/km.
- Businesses that install charging points at work for electric vehicles can claim 100% first year allowance.
- Employees can charge their own electric cars at the workplace with no benefit in kind tax charge ensuing. Note that if the employer pays for or reimburses the employee for charging up their own car away from the workplace the exemption does not apply. The charging point must be available to all employees. The same applies if the employee is simply a passenger in a car owned by say a friend.
- The cost of the business installing a charging point at the employees home where they have a company car is not liable to a benefit in kind charge. That would not be the case if it is regarding the employees own car.
- There is no car fuel benefit in kind charge for pure electric cars
- If it is a company electric car, the employee, in respect of business mileage, can presently claim 4p per mile tax free.
- If it is an employee using their own electric car for business purposes, then presently, they can claim 45p for this first 10,000 miles and 25p for business mileage in excess of that.
- If the business pays for an electric charge card to allow the employee unlimited access to local authority vehicle charging points in respect of their company car, no taxable benefit would arise. This would not be the car if it was the employee’s own car.
- The vehicle excise duty (VED) rates for fully electric vehicles have been reduced to nil until at least 2025. Where the vehicle costs exceed £40,000 there is not VED expensive car supplement. There are reduced VED rates applicable to some plug in hybrid vehicles.
- Businesses can claim 130% Super deduction first year allowance for new electric cars purchased on or after 1st April 2021 and up to and including 31st March 2023.
- Scotland has two electric vehicle Interest free loan schemes, one for used electric vehicles (max. loan £20,000) and one in respect of new electric vehicles (max. loan £28,000). The latter is due to come to an end on 31st March 2021.
If you are affected by any of the content in this blog or have any questions, please feel free to get in touch, we’re here to help!
0114 400 0119