Why are lawyers leasing electric cars via their LLP

Lawyers are using their LLP to lease their electric car

With mass-adoption of all-electric vehicles underway, the e-car lease team are noticing trends with certain industries who are moving towards battery technology instead of petrol or diesel options. And as the recent November 2023 data from the SMMT group shows it is the fleet and business customers who are really pushing new car registrations in the UK and with BEVs now offering considerable benefits, it is not wholly surprising.

However, for November 2023, the green car industry did incur some bumps in the road, with only 24,359 BEVs registered compared to the 29,372 registered in November 2022. While this isn’t particularly beneficial for us to hear, the good news is that we are fast approaching 300,000 all-electric registrations for 2023, which is nearly 30% higher than last year.

At November 2023, it’s worth noting that nearly 80% of the EVs registered were taken on by fleets and businesses as opposed to personal contract hire and true retail customers. As we will cover below, there are good reasons for such strong interests from businesses, like solicitor practices.

When we say business leasing (or Business Contract Hire), we generally refer to a situation where a customer is one of:

•  Sole trader;
•  Partnership;
•  Limited Company (LTD); or
•  Limited Liability Partnership (LLP).  

While the majority of business enquiries we receive are from Limited / Ltd customers, there are some professions which have traditionally been operated as partnerships and which are now using the LLP status to carry out their trading activities.

As per the Government website  where you have a business with two or more members (individual or corporate), you can incorporate that relationship into a formal business. In doing so, this will have a name, registered address, register details with Companies House and have a fixed LLP agreement which confirms how the business will be run.

Where sales exceeds £85,000, the LLP will be registered for VAT. In addition, each member will pay tax based on their share of profits, as per a normal partnership. However, this is a separate legal entity and can therefore engage with other business or undertake financial obligations separate to the members. An LLP does not pay corporation tax or submit a company return but the members do pay tax on the value of their portion via a self-asessment tax return.

Not unlike a limited company, there will be a number of key documents which need to be organised and filed at Companies House which includes:

•  Confirmation statement;
•  Annual Accounts;
•  Unique Reference Number; and
•  Details of any mortgages or charges created by the LLP. 

While some of the above would be required by the e-car lease team in preparing an application for a new electric vehicle, we do not always require them if regular submissions and accurate details are provided - for example precise completion of our business proposal form. To be clear, as a broker (not a lender or manufacturer) we utilise the details you provide us to make a finance application to a selected finance company.

We will let you know in advance as to who this finance company is and it is most often the funder who has the cheapest deal on your required EV. However, in some cases, due to the customer’s bespoke requirements, we may recommend a specific finance company.And many legal / solicitor practices do operate as LLPs. For the members, they are now becoming aware of some of the fantastic benefits which are available to them.

With contract hire / leasing, 100% of the rentals (including the initial rental / deposit) can be offset against tax, in contrast to the 85% in cases of more polluting vehicles (above 50g/km of CO2). For any members, or employers of the LLP, the good news is that the private fuel for company cars does not apply to electricity; this mean that if you install charge points at your registered office / practice, the cost of fuel doesn’t’ insure a taxable position.

In contrast, company car users with a fuel car do incur a taxable benefit of £27,800 for tax year 2023/24. For any employees who do claim mileage allowance (AMAPs) on their EV, do note that the rate is currently 9 pence per mile. Depending on where you charge, this might not adequately cover your costs, which is why the e-car fuel cost calculator is so crucial.

For any solicitors who are using the electric company car scheme, it is worth highlighting that company car tax is still payable as an employee (but not as a member).

As a benefit to the individual, HMRC do apply a calculation based on the price of the car (the P11d value) which is the list price + Vat + delivery fees + any accessories, an “appropriate percentage” on BiK which is set by the vehicle’s CO2 (which for an EV is 0 g/km) and a percentage based on the individual’s income tax threshold.

A formal process does need to take place with HMRC  to record this accurately and this will confirm what tax needs to be deducted. Because of the zero-emissions, the BiK percentage is only 2% until 2025 and then it will increase by 1% each year.

In isolation this might not sound a lot but a £60,000 vehicle (P11d) electric car would only cost a 40% tax payer £480 a year in tax. Compare this to a £35,000 (P11d) petrol car with 115g/km of Co2 then the same example for a 40% tax payer would be £3,920! In using a company car arrangement, it’s also worth noting that the employer will pay Class 1A NICs on the value of the taxable benefit (15.05% standard rate). This is dramatically reduced on an EV.

While an EV doesn’t currently pay any Vehicle Excise Duty / RFL / Road Tax, do note that this is going to change in 2025. Applying to any zero-emission vehicle registered after 1 April 2017 equal treatment of combustion / EV will come into place.

While no set values have been provided, the first payment is likely to be nominal. However, do note that the second tax payment of VED on “alternative cars” is currently £170 per year, with an “Expensive Car Supplement” of £390 per year for any car value beyond £40,000. This does need consideration when moving electric

Overall,  the tax position for leasing an electric vehicle for the employee of the legal LLP is somewhat pertinent. And what also needs adding is that EVs are incredible machines - robust ranges, incredible performance and 0-62 times, towing capabilities and lower running costs (servicing and fuel).

While financially, buying or leasing your EV is far more tax efficient for the LLP than a combustion option, this is not just a fiscal transaction. The move to electric is proving to be beneficial for many drivers and the overall experience is positive. Many would not consider returning to combustion alternatives after the contract cessation. 

And talking of the perfect electric car for our legal customers, please see this amazing BMW in preparation for delivery.

In terms of the car shown, the BWM I4 GRAN COUPE 400kW M50 83.9kWh 5dr Auto Pure Electric Vehicle, this is based on the following configuration:

•  Metallic Paint - Black Sapphire
•  Vernasca leather - Black with grey stitching
•  20" M Double spoke light alloy wheels in bicolour with mixed and performance tyres - style 868M
•  Both Mode 3 / Type 2 Charging Cable (Public Charging & home wallbox charger – Fast charging) & Mode 2 / 10amp 240v Charging Cable (Domestic 3 pin plug - Slow charging) 

From £72,140 this AWD SUV will have a 80.7 kWh usable battery which will offer 0 – 62 times of 3.9 seconds, 140 mph top speeds and 400 kW (or 536 hp). Expect a combined winter range of 235 miles with warmer weather allowing for 320 miles.

On charging, the 11 kW AC max will allow 8 hour and 45 minute  0 – 100% charging times with the 207 kW DC maximum allowing 27 minute 10 – 80% times. A cargo volume of 470L is available with this car. It has a vehicle fuel equivalent of 140 mpg. This EV will have no Bidirectional charging. And the car will be able to tow 750 kg (Unbraked) and 1600 kg (Braked).

Browse our BMW I4 deals