Outright purchase or PCP?

[Rodders]

My Taycan Turbo (And my business partner’s Taycan 4S) are due to be delivered end July/beginning August. I’m receiving conflicting advice on the availability of 100% capital allowances In year 1. Our accountants are telling me the only way to achieve this is to buy the cars outright but VWFS are telling me that, if we run a PCP through the business (with a guaranteed residual after 3 years) we can claim 100% capital allowances in year 1. Does anyone have an answer to this one?

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[Lfcdan]

Your accountant is wrong mate

 

[Persuader]

Hi. Your accountant is definitely wrong. PCP & HP are treated the same as a cash purchase for the purpose of accounting.

 

[Rodders]

Hi. Your accountant is definitely wrong. PCP & HP are treated the same as a cash purchase for the purpose of accounting.

Thx

 

[Gogs]

Thx

Correct, I checked with my accountant today, main thing is get the invoice in the company's name. The registered keeper in you personal name, that lowers your insurance.

 

[r553]

Get a new accountant along with your new cars.

 

[Rodders]

Get a new accountant along with your new cars.

Ha! It's Mazars and they're quite conservative. They quote the relevant HMRC wording, which says that one of the conditions for the PCP to be deemed a financial lease which qualifies for the capital allowances is:

the lessee has the option to purchase the asset at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable

Having said that, it's up to us as directors

 

[Squarecircle]

I would have to side with Mazars here. PCP is more often than not, classed as a lease for accounts and therefore, tax purposes. If it is classed as a lease you can not claim capital allowances, VWFS would.

Accounting rules treat PCP as a lease unless as quoted above, the final balloon payment is lower than fair value of the asset. Tax then follows the accounts in most cases. Personally, I would not listen to VWFS as they dont always give the right advice.

Mercedes argued this exact point for VAT purposes on the basis that there is no real difference between contract hire (lease) and PCP and won. PCP is now treated as a lease for VAT in most cases now as well. Different tax but the principle is the same, PCP is essentially just hire.

On the plus side, if you do treat it as a lease you can reclaim 50% of the VAT under PCP now (assuming the final payment is market value) and this is the route I am going down.

 

[Kilsoj]

My take on it was that you can claim 100% wda, and the interest from the pcp, but have to write back in after the the end of the agreement.
Dealers were very clear you couldn’t claim any portion of the vat in this instance

 

[Lfcdan]

You can claim all the VAT on PCP if you claim its all for business use!!!!

 

[Squarecircle]

I will just clarify a bit:

PCP is a generic term and each agreement has to considered based own it's own terms with the various accounting and tax rules applied. The rules are ever evolving as well (the Mercedes case being a prime example which changed the rules in 2019) which does not help. Finance companies are also very good at creating complex products and we have apply the rules as best we can, so it is sometimes grey.

If you are treating a PCP as HP and saying the company owns it, you would claim capital allowances and the 100% FYA. You can not reclaim the VAT with this approach unless its 100% business use which is neigh on impossible.

If you are treating the PCP as a lease/contract hire, you should be able to reclaim 50% of the rentals. This would not include the VAT on the balloon payment.

The finance companies tend to confuse themselves as well (I used to have to audit them so know this well) which is why I would not believe everything that is said, same goes for the dealers. You should always check with a suitably qualified person. Being lazy and nothing to do with me but this link explains it well https://albertgoodman.co.uk/changes-to-vat-on-pcp-contracts/

I had a quote for contract hire and PCP and the payments over the three years after the VAT adjustment was within £500 of each other. Interestingly, you usually cant buy the car out at the end of a contract hire agreement but Porsche do let you. So to me, the only difference is if I wanted a guaranteed price to pay at the end or take a gamble that prices may fall further than Porsche think and go contract hire.

 

[Kilsoj]

Squarecircle thanks for the info - a lot of conflicting ideas

 

[DMTaycan]

My accountant asked for a copy of a Porsche PCP agreement and after reading it suggested that outright purchase or hire purchase may be viewed by HMRC as a purchase, hence would be able to claim 100% capital allowance. He believed that my Porsche dealer PCP wording classify as lease under tax rules.
cash flow aside, the interest over 3 years would probably offset any drop in future value in 3 years, so maybe PCP GFV is not as attractive as it first appears, that is if a cash purchase is financially possible

 

[Gogs]

My accountant asked for a copy of a Porsche PCP agreement and after reading it suggested that outright purchase or hire purchase may be viewed by HMRC as a purchase, hence would be able to claim 100% capital allowance. He believed that my Porsche dealer PCP wording classify as lease under tax rules.
cash flow aside, the interest over 3 years would probably offset any drop in future value in 3 years, so maybe PCP GFV is not as attractive as it first appears, that is if a cash purchase is financially possible

I’m of the same opinion. I’m going HP the rates are so attractive and it leaves cash in the bank! Not a bad thing in the current climate.

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