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ASK MILSTED LANGDON
Milsted Langdon accountants and business advisors answer their most frequently asked questions.
IAN LLOYD Partner and Head of the Bath office
DAN KENYON Director
HARRIET BANKS Business Innovation Accountant
IS IT MORE TAX-EFFICIENT TO HAVE AN ELECTRIC CAR? The Government has set up numerous tax incentives for company car users who use electric vehicles( EVs).
It is not surprising then that more businesses have either already made the switch to EVs or are giving serious consideration to doing so. Some of these incentives include the following:
• Benefits in Kind – Since April 2021, EVs attract a 1 % tax rate on Benefit in Kind( BIK). This also applies to hybrid vehicles with emissions from 1- 50g / km and a pure electric range of over 130 miles. This rate increases to 2 % in 2022 / 23, but it still makes electric and low emission cars very affordable in comparison to higher emission vehicles.
• Capital allowance – Cars with CO2 emissions of less than 50g / km are eligible for 100 % first-year capital allowances. This means that electric cars can deduct the full cost from your pre-tax profits. There may be Corporation Tax to pay when the car is later sold, so this needs to be considered.
• Congestion charge exemptions – EVs are exempt from congestion charging and Clean Air Zone( CAZ) charges. As well as London, five cities have been required by the Government to introduce a Clean Air Zone, including, Leeds, Birmingham, Nottingham, Derby and Southampton. If your company vehicle regularly travels into areas where clean air zones exist, there will be significant cost savings from switching.
• Electric charge points – Any business that installs charging points for electric vehicles between now and 31 March 2023, can claim a 100 % first-year allowance for these costs through the Workplace Charging Scheme worth up to £ 350 per charging point.
• Electric vans – The taxable benefit for having the private use of a zero-emission van were reduced to nil from April 2021. The previous year, electric vans were taxed at 80 % of the benefit for a normal van.
• Government grants – The Government’ s plug-in car grant provides 35 % of the purchase price up to £ 2,500 towards the cost of an eligible plug-in vehicle costing less than £ 35,000. This plug-in car grant applies at the time of purchase and is typically given as a discount on the purchase price of a vehicle.
• Leasing – Leasing a vehicle through a VAT registered company allows you to claim back 50 % of the VAT on monthly payments and up to 100 % of the VAT on the maintenance agreement, which you are not allowed to do when buying a vehicle outright. But be aware that a leased EV will not qualify for the Capital Allowances mentioned above.
• Salary sacrifice – Where an electric car is provided under salary sacrifice, the optional remuneration rules do not apply.
• Tax bands for low emission vehicles – 11 new tax bands for vehicles with emissions of 75g / km and below have been introduced. The Government has also announced the tax rate for the next three years, helping businesses to plan. Electric and hybrid vehicles pay no or very little vehicle excise duty.
By thinking differently and challenging the ordinary, our team’ s main focus is to help you thrive. We have built an enviable reputation in delivering trusted, business-boosting accountancy advice since 1988.
CAN I PURCHASE AND EXPENSE A GARDEN OFFICE THROUGH MY LIMITED COMPANY? If your limited company builds an office in a residential garden space owned by an employee or director it may not be eligible for capital allowances, such as the Structure & Building Allowance.
However, it might be possible to use capital allowances to reclaim some of the cost of installation for utilities, such as electrical wiring, plumbing or thermal insulations, via the Plant & Machinery Allowance.
In most cases, the main benefit is a cash one if the right circumstances can be met.
If the garden office is fixed down, then it forms part of your property. This may create Capital Gains Tax issues when you come to sell your home as it may affect how your property is classed. This may also create an issue with insurance and business rates as the office would constitute business premises.
If the garden office is not fixed down, then you could argue that if you were to move, you could take it with you, so the office does not form part of the premises. As such, you would be fine reclaiming the cost of the office from the limited company.
However, where this may fail is proving:
1. That it can be moved or dismantled without any hassle – even offices that aren’ t fixed may require substantial work to be relocated.
2. It is 100 % for business use. This would mean using separate phone lines, internet and utilities that aren’ t shared with a residential property. Separating the domestic and business items would then mean that the office is a business premise, which could lead to the same issues.
Where your garden office is purchased through your limited company, you should also consider personal usage, such as using it for storing personal items or even utilising the space for family activities.
Personal use of a garden office could restrict the allowances you can claim. It may also affect your ability to reclaim a portion of the VAT on a purchase.
HOW CAN I IMPROVE MY BALANCE SHEET? There are many different approaches to improve your balance sheet and boost cash flow. Here are four common steps that all businesses should consider:
Improving debt-to-equity ratio – Reducing your debts and increasing the cash coming into your business can only strengthen your operations. You need to increase your income and use this to pay down debts. If you can’ t increase income, you may need to use assets to reduce debts.
Create a cash reserve – Monitor the amount of cash held and try to build a reserve for investment or emergencies. This can be achieved by disposing of assets, increasing turnover or reducing liabilities.
Reduce cash leaving the business – Cashflow is the lifeblood of your business. If your liabilities exceed the cash being received you cannot operate and you should find a way to manage liabilities.
Strengthen credit control – Many businesses struggle with debts and late payments. These can create a lot of issues with cashflow and balance sheets. Appoint a professional to manage credit control or invest in software that can help do it for you.
If you have a burning question for the Milsted Langdon team, please get in touch. It may even feature in one of our future columns.
advice @ milstedlangdon. co. uk 01225 904940
For more info: www. milstedlangdon. co. uk
THE BUSINESS EXCHANGE 2021 21