Electric Vehicle on PCP as 100% First Year Allowance

New electric cars are listed as assets that qualify for 100% first year allowance, meaning that you can deduct the full cost from your profits before tax, during the tax year of the purchase. If you incur a loss, it can be carried forward to offset your profits the next year and so on. But people rarely buy a new car in cash, usually it's through PCP (Personal Contract Purchase). How would the 100% first year allowance apply to PCP, for instance, £2k deposit, 48 months of £280 monthly payments, followed by a balloon payment of £12k? Can the deposit and monthly payments be counted as capital allowance each year throughout the 4 years, and the balloon payment on the 4th year? If it was a HP (Hire Purchase) would it be different? How do we account for the cost of the EV being spread over several years?

Hi Tian Xu,
Please refer to:
Business cars
Thank you. 

 

The reply contains a link to the page on capital allowances, but this does not clarify the OP's question. Payments on a PCP (Personal Contract Purchase) or BCP (Business Contract Purchase) are purchase payments (not lease payments) and appear to qualify for the 100% First Year Allowance, but does this include *ALL* payments (often made over several years, and then a ballon final payment) or only payments *actually made in the first year*? An example: Say a car was purchased through a Ltd Company, for (say) £30,000, with a BCP 0% finance arrangment of £500 a month for 3 years (36 months) and a final optional 'balloon' payment at the end of 3 years of £12,000. What can be claimed as 100% First Year Allowance, and when? e.g. can the full price be claimed in the next tax return (write off £30,000 from corporation profit in the next tax return)? or can the first 12 monthly payments be claimed (write off £6,000 from corporation profit in the next tax return)? can subsequent years payments be claimed (e.g. write off £6,000 in following 2 tax returns?) can balloon payment be claimed (e.g. write off £12,000 in the 4th tax return, or at another point) what if the balloon payment is not made (do any earlier claims need to be repaid?)

Hi,
With a PCP you are only considered the owner of the vehicle after the balloon payment is made. Until then, you cannot claim allowances for this vehicle. Up to that point the vehicle is effectively rented.
Thank you.

Hi, trying to decide the best way to fund my car but looking at the T’s and C’s of a finance agreement both HP or PCP they both state that until I pay all the payments then the car is not mine? I thought as it was Purchase product I could do FYA but your answer conflicts that.

Hi Cloudy72,
Please refer to:
Expenses if you're self-employed and
Claim capital allowances.
Thank you.