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Charging Electric Car
Hi all just looking for some advice -
Can anybody tell me if it is possible to claim a deduction from Self Employed income, for the cost of charging an Electric Car at home? My client is a Self Employed Taxi Driver and claims back mileage costs, but his car is electric, and he charges it at home. They have asked their case manager but they basically got a reply saying ‘we do not know - just declare it as other expenses’. It would be difficult to apportion the cost of domestic electricity use and that used to charge the car.
There is guidance in the ADM H$ about deductions for using the home for ‘income generating activities’. This is an income generating activity because if he doesn’t charge his car, then he cannot go out to work. They allow £10.00 for any activity that takes more than 25 but less than 50 hours which would apply to the client but I would like some clarity if possible please.
thanks in advance.
If he could claim petrol as an expense, then he can claim the cost of charging the car too.
In terms of working out the actual cost, he will have a meter - he can simply take a reading at the start and end of a period when his house has normal electricity usage but he is not charging the car and compare that with a period of the same duration and the same normal usage but where he has charged the car. Which will allow him to work out the additional electricity usage and cost of charging the car.
Either that or simply compare his current bill with a bill for a period (but same months of the year) before he got the electric car.
See Reg 59(2). No expenses incurred in relation to the use of a car are allowable. The mileage deduction covers all that.
See Reg 59(2). No expenses incurred in relation to the use of a car are allowable. The mileage deduction covers all that.
Yeah id read that. Client initially wanted to claim the cost of his car lease as a deduction and I advised that he couldn’t as the mileage covers the upkeep of the car.
Im just wondering if this is a cost associated with the house rather than the car and whether there is a way around it. If his employer had not given him an electric car, then he wouldn’t be incurring any additional cost, but as the car is electric, it has to be charged and the only way he can do this, is to do it at home. Just seems a bit unfair if he cannot claim any costs for it.
I see what you’re saying. I don’t think it’ll work though.
Why do you think he’s worse off though? If it wouldn’t be electric, he’d be filling up petrol instead, no?
I see what you’re saying. I don’t think it’ll work though.
Why do you think he’s worse off though? If it wouldn’t be electric, he’d be filling up petrol instead, no?
Exactly, it makes no difference what kind of fuel the car runs on, you cannot double claim for both flat rate mileage and actual running costs. As Reg 59 is expressed as an alternative to Reg 58 he could presumably submit details of actual vehicle costs including a reasonable recharging estimate (there are loads of £ per mile calculators online). But the expenses allowed under Reg 58 don’t include paying down the capital on car finance so the flat rate is likely to be the better buy.
Most cars (but not black cabs/hackney carriages) have to use the flat rate mileage - see Reg 59(2).
Vehicles that can use Reg 58 would be able to deduct the capital cost of the car from their profit that month, and carry forward losses to future months. Obviously, that will often mean the MIF comes into play. There could therefore be a significant advantage in buying the vehicle using finance, as that allows you to spread the cost better.
Are you reading Reg 58(4) as making it compulsory to use Reg 59 for motor vehicles?
No, the full-out words at the end of Reg 59(2). Only “cars” though, which has a specific meaning from tax legislation.
I see what you mean. Meh … could be clearer if it is trying to say there is no choice with a car, Reg 59 must always be used and never Reg 58.
If it is possible to rely on Reg 58 instead for car expenses, wouldn’t para (3)(c) prevent car finance repayments being deducted? Or is HP/PCP not a “loan”?
I see what you mean. Meh … could be clearer if it is trying to say there is no choice with a car, Reg 59 must always be used and never Reg 58.
What else could it mean?
The logic behind it is simply that cars are exceptional within the cash basis rules that they cannot be deducted in full at the point of purchase, but must still use capital allowances. For UC, they didn’t want that complexity, so insisted on using flat-rate mileage.
That is why, when they allowed motorcycles to be deducted in full under the cash basis, they also amended the UC Regs to allow motorcycles to use Reg 58.
If it is possible to rely on Reg 58 instead for car expenses, wouldn’t para (3)(c) prevent car finance repayments being deducted? Or is HP/PCP not a “loan”?
Under the cash basis for tax purposes (which the UC rules are based on), these payments are fully deductible as they are paid (including the interest element), as HMRC do not consider it a loan. However, you could be right that UC is different. I’m going to have to look into this.
EDIT: Hmm, it appears the reason HMRC do not consider it a loan is not due to any clear statutory provision, but simply because it is not “cash borrowing” (see for example the last paragraph here). If so, that would equally apply for UC too.
UC follows the tax treatment in this area, (for example, the £41/month interest deduction allowed for UC is based on the £500 annual allowance for tax), so I think it unlikely the intention was to be different to tax for this.
I couldn’t find a definition of loan so I wasn’t sure. Your accountancy background provides useful insight into the terminology here. I suspect there are terms which do not have a definition in the UC Regs but should nevertheless be regarded as terms of art because of their established meaning for tax purposes - “loan” might well be one such term.
I was also comparing and contrasting the UC Regs with the HB Regs on business loans. There, repayment of loan capital is allowable when it is for the replacement of equipment or machinery. This was discussed in R(H) 5/07 where the Commissioner elides car finance with business loans (but without hearing any argument that there might be an important distinction). He also treats the car itself as an item of equipment and machinery: see para 26 - this is an example of accountancy terms of art not necessarily carrying over into social security. I have always taken the policy intention to be that the HB scheme will not subsidise the claimant acquiring possessions that they didn’t have before, but will subsidise the replacement of possessions that are worn out using them for business purposes - this comes as close as possible to a level playing field for employees who do not have the advantage of having a car bought for them by the HB scheme. If you start out with one car, HB will subsidise you to get another on the basis that you will need to do so more often because of work; but if you start out with no cars HB won’t buy your first one.
UC Reg 58 doesn’t seem to make any distinction between initial purchase and replacement … but then if Reg 58 doesn’t apply to cars in the first place it doesn’t really matter!
I’m not aware of “loan” having a particular meaning in tax/accountancy, but it certainly appears that in this case HMRC interpret it to mean a loan of cash.
It’s interesting that HB allow deductions for capital repayments on loans taken out to replace existing assets, but not the actual expenditure if no loan was taken out. I can’t see the logic in that.
UC allows the actual expenditure in all cases (as long as it’s an asset which depreciates and isn’t a car).