Farms and Estates update: Electric vehicles

Published: Monday 29 May 2023

As electric vehicles, or EVs, are becoming an ever-increasing sight on our roads, more and more people are considering whether an EV is right for them, or indeed their business.

Below are some of the differences to consider.

Availability

There are still significantly fewer EV options available on the market. Land Rover do offer a hybrid option, but the range is currently only 27 miles.

Purchase price

A new diesel Land Rover Defender 90 starts at £62,000. The hybrid electric counterpart, Land Rover Defender P400 PHEV starts at £65,000.

As a comparison, the BMW iX is fully electric. The price starts at £68,000 though you may have concerns over its suitability to be a working farm vehicle.

In most cases, EVs have a higher residual value than their non-electric counterparts.

Running costs

Compared to the Land Rover Defender, a pure EV would save in the region of £1,500 for every 10,000 miles driven.

EVs are currently exempt from road tax, however the annual tax for the diesel Defender would be between £165 and £520.

Capital allowances

For non-electric cars (not commercial vehicles) the annual tax relief available on purchases is limited to 6% or 18% of the purchase price of the asset, on a reducing balance basis.

For EVs a first-year allowance can be claimed. This is 100% of the cost of the car in the year of purchase.

Leased cars

Vehicles with CO2g/km emissions of 50 or higher, suffer a tax restriction of 15% to the allowable costs.

Private use of cars

For sole trades and partnerships, any private use by the partners would restrict the running costs and capital allowances which can be claimed.

If an employer provides a car to a director/employee which can be used for personal journeys, this will represent a taxable benefit in kind for the employee.

The benefit in kind charges range from 2% of the list price for pure electric cars, or the best performing hybrid cars, to 37% for the higher emitting cars.

IN SUMMARY

If you are looking to purchase a new car, certainly EV, or hybrid is likely to come with a significant upfront cash flow advantage in the form of 100% capital allowances; however, this is only a timing difference. When the vehicle is eventually sold, there will be an adjustment to ensure that the capital allowances claimed match the actual depreciation (loss) on the vehicle. For an EV this would likely mean there would be a charge to income in the year of sale.

If you are looking to change a business car, start with the commercial aspects and which vehicle best suits your needs. If you find an EV is a viable option, understanding your tax position will assist you in determining the best time to purchase.

Content image: /uploads/team/unknown.jpg Nick Dee
Nick Dee
Partner, Farms and Estates
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Content image: /uploads/team/unknown.jpg Nicholas Smail
Nicholas Smail
Partner, Farms and Estates
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Content image: /uploads/team/unknown.jpg Lucie Hammond
Lucie Hammond
Partner, Farms and Estates
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