Purchasing an Electrical Vehicle through your Personal LTD Company

Climate change is a hot topic now and rightly so. We are far more conscious of how our actions as an individual and on a collective basis impact the environment. With that in mind, the purchase of an electric car may be something you are considering. Here we explain the tax advantages and how you make the purchase via your Personal LTD Company.

  • Benefits
  • Financial Advice

Should you wish to Purchase an Electric Vehicle in your limited company, the below tax advantages apply. 

Benefit in Kind(BIK)

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 of the Vehicle and Multiplying it by a % depending on the type of vehicle and mileage and the top rate is 30%.

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 

OMV = €80,000 - €50000 = €30,000 

BIK = €30,000 X 30%* = €9,000 

PAYE/PRSI/USC = €9,000 * 52% = €4,680 

*we assume highest rate of BIK and highest rate of Personal Tax

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 of 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.

Examples:

Electric Car purchased in 2019 for €23,500 

(i) You can write off (€23,500*12.5%) €2937 per annum

(ii) You can write off €23,500 in full in year 1 thus benefitting 

Electric Car purchased in 2019 for €40,000 

(i) You can write off (€24,000*12.5%) €3,000 per annum or

(ii) You can write off €24,000 in full 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 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 normal loan.

If more information, please contact info@iconaccounting.ie or call +353 (0)1 8077106

Author

Gerard Kiernan

Director

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