Does it save to go electric?

With improving technology and charging infrastructure, along with substantial increases in the costs of petrol and diesel, many companies are looking to electric vehicles (EVs).  There are also significant tax benefits of doing so.

The personal tax liability of having a company car is based on the Benefit in Kind (BiK) value, which is illustrated in our factsheet here.

With it being on UK Government’s agenda to increase the use of more environmentally friendly cars, the CO2 emissions required to be in a high BiK percentage have gradually reduced. In the current year, the highest percentage applies to any petrol car with CO2 emissions over 159 g/km and any diesel car which doesn’t meet RDE2 standards with CO2 of over 144 g/km.

You can read our factsheet for examples of the various benefits to choosing an electric company car here.

Tax reliefs available to the company

If the company leases a car, for cars with CO2 figures above 50 g/km, only 85% of the lease payments qualify for Corporation Tax relief. As fully electric cars have no CO2 emissions, their full lease payments qualify for relief from Corporation Tax.

If the vehicle is purchased, Capital Allowances are available on the purchase cost, which enables a proportion of the cost to be set against profits liable to Corporation Tax. For petrol or diesel cars, they may only be at a rate of 6% of the cost each year, if the CO2 emissions are more than 50 g/km. Fully electric cars on the other hand qualify for 100% allowance in the first year as long as the car is purchased new and unused (with possible exceptions for ex demonstrators). This enables the company to set the full cost of the car against profits liable to Corporation Tax in the year of purchase.

Charging point tax considerations

The cost to the company of installing the charging points at the workplace will typically qualify for 100% relief against Corporation Tax in the year of the installation. Additionally, there is no BiK on the costs of electricity for charging a company car at work

If the company was to install a charging point at an employee’s home, there is no BiK for the installation cost. An employer can also provide an employee with a charge card of up to £100 each year to allow access to local authority charging points without attracting a BiK charge.

If an employer pays for an employee’s home electric bill, this is taxable in the same way as salary. As an alternative, an employer can pay a mileage rate of 5p per mile for business mileage, when the employee charges at home, without tax implications.

In summary

The significant tax benefits of EVs as company cars have considerably increased their popularity. Approximately 14% of all vehicles in the UK are registered to companies but nearly 60% of electric vehicles are registered to companies.

Full EVs can have range limitations and you would need to consider where you can charge them but if this works out for you, the tax benefits make a fully electric company car an extremely attractive option.

If you would like to discuss any of the points above, advice on having a fully electric car as a company car or supplying these to your employees, please get in touch with our EQ Technology Team on technology@eqaccountants.co.uk.