In recent years, the trend to acquire a Porsche has changed as Porsche launched electric vehicles.
Traditionally many Porsche 'buyer's would have used either personal PCP or straight forward hire purchase. PCP was the most popular - in a summary, PCP is as follows :
1) You pay your initial down payment.
2) You then pay your monthly payments over a set term and annual mileage eg 36 months / 30,000 miles contract.
3) At the end of the agreement you have 3 options :
a) you hand the vehicle back - any excess mileage will be charged and any damage beyond fair wear and tear will be recharged ; or
b) you refinance or pay in full the final balloon payment; or
c) a lot of dealers may see your car as having a higher value than the final balloon payment so they may trade the car in on your behalf and use the positive equity towards your next Porsche.
With the arrival of the Taycan and now the Macan all electric, business owners started using PCP's but in a business format ie Business PCP. Once it goes through a Limited company then tax implications come into play. Business PCP is seen as an ownership form of finance, so that means that if you have a Limited company you can claim write down allowances. The percentage of write down allowance is based on bandings of where the car CO2 sits, full electric Porsche Taycan and Macan electric have a CO2 0 g/km so they fall into the 1st banding below ie
➢ 0g/km (Zero) = 100% (First Year Allowances)
➢ 1 to 50g/km = 18% (Main Rate Pool)
➢ Above 50g/km = 6% (Special Rate Pool)
So what does '0 g/km (Zero) = 100% (First Year Allowances)' mean for these models of Porsche?
This means if you do a business PCP (ie buy) and the Porsche electric car is say £90,000 in total, you can actually offset that entire £90,000 in the first year of purchase against your taxable profits in that same financial year. It's a huge incentive. So in simple terms, you make £100,000 profit, you buy the Porsche, you only pay corporation tax tax on £10,000 profit now ie £100,000 - £90,000 electric car = £10,000 profit. This is attractive if you have had a brilliant trading year and need to lower your corporation tax. The company will stay pay HMRC an annual one off class 1a (15% from April 2025) payment, in this example it will be £90,000 x the CO2 tax percentage - it is 3% for 2025/26 ie see link ( Benefit in Kind Company Car CO2 tax tables from 2024/25 to 2029/30 | Every Vehicle Lease ) = £2,700 Benefit in Kind x 15% (Class 1a NI %) = £405 due to HMRC.
The employee still pays company car tax, again for this £90,000 Porsche electric example it will be £2,700 benefit in kind x their tax rate ie if a 20% tax payer it will be £540 per annum (£45 per month) or if a 40% tax payer it will be £1,080 per annum (£90 a month).
The hidden business PCP trap?
The final balloon payment - many small SME's have funded their cars this way and claimed the 100% write down allowance, however, many think they can simply keep this claimed tax relief if they hand the vehicle back ie if they do not pay the final balloon payment. Let's say the final balloon payment was £50,000 - if you hand the vehicle back after 3 years and have claimed the 100% write-down allowance of the £90,000 purchase price, the amount of £50,000 will come back on your balance sheet as taxable income - this is catching so many business owners out. The reality is you cannot claim £90,000 tax relief without actually spending £90,000 - in the example above a total of £40,000 has been spent ie £90,000 list price less the final balloon £50,000 payment = £40,000. And HMRC will notice this.
This can also cause a lot of unforeseen issues as follows :
1) in 3 years time you may have had a poor trading year and cant afford to take another Porsche, so you choose to hand the vehicle back at the end of the PCP agreement - you now have £50,000 taxable income coming back on your P&L that you will not have accounted for, and corporation tax is due on this amount.
2) If you did pay for the car in full ie paid out a full £90,000, the depreciation on these cars is unfortunately higher than normal - you have an asset on your balance sheet that will have a lot less value than what it had 36 months earlier. You also have to take the role of car sales man and try and sell the vehicle either through advertising or through a trade company offering you a bid for the car.
The alternative way to drive your electric Porsche.
The other cost effective way is to lease ie contract hire your electric Porsche. If you are an individual, you can arrange a personal contract hire (PCH) from our funders. If you are a SME Limited company, you can arrange a business contract hire (BCH) from one of our funders (Lex Autloease, ARVAL, Alphabet, Santander or Novuna). Our funders will pay the Porsche dealer directly for the full title of the Porsche - they will effectively rent to you over a set term and mileage (can include a service, maintenance and tyre package) and at the end of the agreement the funder takes the car back ie you don't have any depreciation risk.
PCH - personal contract hire.
- initial rental payment (includes VAT)
- Monthly rental based on your term and mileage (includes VAT)
- Optional monthly service, maintenance and tyre package (includes VAT)
- Hand the vehicle back at the end of the lease ie no option to purchase, no final balloon payment.
SME Limited businesses - BCH - business contract hire.
- initial rental payment (includes VAT) - reclaim 50% of the VAT of the finance element if you are VAT registered
- Monthly rental based on your term and mileage (includes VAT) - reclaim 50% of the VAT of the finance element if you are VAT registered
- Optional monthly service, maintenance and tyre package (includes VAT) - reclaim 100% of the VAT of this element if you are VAT registered
- Hand the vehicle back at the end of the lease ie no option to purchase, no final balloon payment.
Your company still has these fantastic tax advantages for these electric Porsche vehicles on a business contract hire lease :
- can offset 100% of the net finance rental against taxable profits
- can offset 100% of the net service, maintenance and tyre monthly cost against taxable profits.
Company still has to pay annual Class 1a National Insurance (as detailed above) and the driving employee will still have to pay company car tax (as detailed above).
Where can Every Vehicle Lease help?
We specialise in contract hire, Porsche dealers do not offer business contract hire with a service, maintenance and tyre package so you will need to speak to a specialist leasing broker like us to find out more about this product. We have a selection of funders that specialise in high value electric cars like the Porsche Taycan and Porsche Macan so we can check their rates to ensure that you are getting a market leading lease arrangement within your budget. Paul Griffiths in our team can explain in more detail the tax implications for your specific Porsche configuration (or any other high value electric car) and outline the employee's tax for the next 4 financial years - contact us on info@everyvehiclelease.co.uk and ask for a call back or ring 028 9693 6363 or 0113 521 1666 and ask for Paul Griffiths. Cars and funding can be arranged for any individual or limited company throughout the UK. We can take over your order if you have paid your deposit for your build slot or we can source a car from our dealer network.