Electric Car Leasing for dentists - why are UK limited companies going zero-emission?

Leasing an electric car for a dentist -more UK Limited companies are going zero-emission

Last week (20 November 2023) was a big one for the UK, with the Autumn Statement confirming some key points for personal and business EV drivers plus some clarification for battery / vehicle manufacturers. The only absent point was the VAT element on public charging which the FairCharge Group have been pursuing for some time.

As many domestic households may be aware, the level of Vat on their electricity bill is lower than what you pay for goods and services elsewhere (5% as opposed to 20%). With one of the key rationales behind zero-emission driving being lower running costs based on petrol / diesel vs electricity, the cost we incur for charging our vehicles is important.

To help illustrate this to e-car customers, our website will set out the cost of charging at home (set to a standard amount of 27 pence per kWh). However, on our EVC™ we actually set out the cost comparison between domestic and public charging sessions.

With some rapid charge points now in excess of 70 pence per kWh, this translates to double (if not treble) the amount to charge outside of the home. For electric car drivers with high-mileage or with no off-street parking, this effectively means they are punished by some additional 15% of Vat which should not be applied.

But where the Statement did assist, was in the Government’s continued commitment to investment into the UK, with incentives being offered to those companies producing batteries or vehicles in the UK. Only a day later, the BBC reported that Nissan would be one key company investing into the UK at their Sunderland factory.

While the existing Nissan Leaf will continue to be produced here, the upcoming electric Juke and Qashqai will also be manufactured in the Sunderland “EV36Zero” hub too. And what does the future hold for Nissan / the UK with this investment? 

• A future £1 billion+ investment into UK operations, including RnD and manufacturing, along with manufacturing and skills improvements;
•  An upcoming £423m investment into EV36Zero “first-phase”;
•  The design and implementation of an electric Nissan Juke, which is one of the world’s most-popular crossover units in combustion format; and
•  The design and implementation of an electric Nissan Qashqahi, which was the world’s first mass-market SUV.  

With Nissan’s firm ambitions for an all-electric 2030, the company will need a robust infrastructure to deliver this. And this does necessitate Governmental support, which is where the Automotive Transformation Fund becomes so key. With further top-ups announced in November’s statement, it is envisaged more manufacturers will confirm further projects in the UK. And if a deal with the EU cannot be reached on tariffs, production in the UK will be vital as part of cost control.

And is this welcome news for UK businesses going electric with their fleets?

As pictured here, the e-car team are experiencing a healthy intake of interest from small and medium businesses looking to electrify their fleets. Associate Dentists are a particular profession enjoying the benefits of EV adoption. Where NHS dentistry workloads reduce, many dentists have been using a limited company to trade.

However, before moving to a limited company, you should always consult an accountant and tax specialist, as there are pros and cons to moving to an incorporated body over employment. For example, if you operate a limited company you cannot contribute to the NHS pension scheme nor can you benefit from the NHS parental leave benefits system, which is a generous setup for families. We found a great guide to incorporation and dentists . 

There are clear benefits to a limited company over employment or even a sole-trader status, particularly in cases of high-earners who will succumb to 40 or 45% income tax thresholds. With a limited company, taxation is treated differently, in that profit is subject to tax at 25% (where profits exceed £250,000) or 19% in cases where a company has profits lower than £50,000.

For profits between £50k and £250k, the main rate will apply but subject to marginal relief. In addition, the director (employee) and the shareholder will be taxed in accordance with income tax rules on their salary and any dividends payable. This is why good accounting advice is recommended, as dentists should be properly educated on the best route for their company.

But one of the big advantages to using a limited company, is that certain assets (which you would otherwise need) can be procured in a tax-efficient route via the Ltd company. 

Electric cars are fast becoming an interesting asset for dentists because they offer such a beneficial proposition. With contract hire / leasing, the monthly rental the company pays is 100% allowable against corporation tax. Because an EV does not emit any CO2 from the tailpipe, it is not subjected to the rental restriction / disallowance.

For VAT registered businesses, up to 50% of the VAT on the finance rental and 100% of the VAT on the maintenance rental can be reclaimed, which is not possible for individuals / personal lease customers. Additionally, you can use your limited company to pay for the charge point and even the electricity used to fuel the EV (there is no private fuel benefit charge for electricity).

Anything you do pay for via your company is completely tax deductible and this only serves to reduce your corporation tax bill.

The only point to note is that company car tax does apply to this situation and dentists should consult their accountants to help understand their annual exposure. The way in which this car tax is calculated is achieved via BiK (Benefit in Kind), which applies a percentage to the vehicle’s P11d (list price + Vat + options) in accordance with the CO2.

Because an all-electric vehicle has 0g/km of CO2, the 2023/24 BiK is just 2%. In practical terms, this means that many EVs cost no more than £10 - £50 per month in company car tax. And while the BiK rates are increasing by 1% from April 2025 (and 1% per year thereafter), this is still a far better arrangement than a combustion vehicle, with many popular models sitting at 30 - 37% on BiK. In these cases the company car tax would be hundreds of pounds per month.

Would a dentist company have to use contract hire?

While the majority of the contracts we supply are based on the usership nature of leasing, with the EV going back to the finance company after 2- 4 years, some businesses are now considering Contract Purchase  as a route of obtaining a pure electric vehicle.

The Contract Purchase method utilises capital allowances, which allows 100% of the vehicle’s value, plus any future interest payments, to be offset against corporation tax. In this way, a business can vastly accelerate their tax-savings in one year, as opposed to offsetting just those monthly rentals paid in the relevant tax year.

For high-value EVs (especially above £100k), this can offer a considerable tax saving on the 25% rate. But isn’t there a risk? Not unlike a PCP for individual customers, at the end of the contract the customer can simply return the vehicle to the finance company and organise a new contract. Alternatively, the customer may pay the guaranteed residual value to purchase the car. But, as noted above, always consult your accountant / tax specialists so that you are confident in the arrangement. 

In terms of the car shown, the Cupra Born Electric Hatchback 150kW V3 58kWh 5dr Auto Pure Electric Vehicle, this is based on the following configuration:

•  Premium metallic paint - Aurora blue
• Grey Dinamica Bucket Seat
• 20" Hurricane machined aerowheels
• PY1 Tool Kit for 19" and 20" wheels
•  Mode 2 Charging Cable 

And how does the Cupra Born V3 perform?

This RWD hatch will have a 58 kWh usable battery which will offer 0 – 62 times of 7.3 seconds, 99 mph top speeds and 150 kW (or 201hp). Expect a combined winter range of 180 miles with warmer weather allowing for 250 miles.

On charging, the 11 kW AC max will allow 6 hour and 15 minute  0 – 100% charging times with the 124 kW DC maximum allowing 31 minute 10 – 80% times. A cargo volume of 385L is available with this car. It has a vehicle fuel equivalent of 150 mpg. This EV will have no Bidirectional charging. And the car will not be able to tow.

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