BY RICK SCHOFIELD , PARTNER , AZETS
Electric vehicles – the tax considerations
NOW IS A GOOD TIME TO CONSIDER INVESTING IN ELECTRIC VEHICLES TO BENEFIT FROM TAX BREAKS , ESPECIALLY WITH THE ANNOUNCEMENT OF THE WITHDRAWAL OF NEW PETROL AND DIESEL CARS FROM 2030 .
There is no denying that electric vehicles will continue to become more commonplace on our roads , with technological advancements making them a more viable and affordable proposition . To be environmentally friendly , employers are now acquiring electric vehicles as company cars , with the added benefit of reduced running costs .
From a tax perspective , now is the ideal time for businesses to consider ‘ going electric ’. For employees , the reduced Benefit in Kind ( BIK ) rate of 0 % from the current tax year for pure electric cars has strong appeal given the trend of increasing BIK percentages for other cars .
It is clear the UK Government is currently keen to incentivise the use of zero-emissions vehicles . Should electric vehicles become the default choice , the need for the Government to incentivise will cease , as will the current reliefs available .
Here we have outlined in further detail the tax considerations in relation to using electric vehicles for your business .
Employee Benefit in Kind
The BIK rate for electric vehicles dropped from 16 % to 0 % from April 2020 and is due to increase to 1 % in April 2021 and 2 % in April 2022 . This also applies to vehicles ( where registered after 6 April 2020 ) with CO2 emissions of up to 50g / km and at least 130 miles of electric-only range .
The standard amount against which a fuel benefit is assessed has increased to £ 24,500 in 2020 / 21 . For electric vehicles provided as company cars , there is no taxing provision as electricity is not recognised as ‘ fuel ’. Similarly , workplace charging will not give rise to a BIK .
Legislation extends the exclusion from the company car fuel charge to any “ facility or means for supplying electrical energy ”. This means that an employer can pay for the following without a BIK arising :
• A vehicle charging point to be installed at the employee ’ s home .
• A charge card to allow individuals access to other charging points .
It should be noted that these provisions only apply to company cars and not in respect of privately owned cars that are used for business .
The Optional Remuneration legislation introduced in April 2017 does not apply to ‘ ultralow emissions vehicles ’ ( ULEVs ) which includes electric vehicles . This provides flexibility to employers wishing to utilise a salary sacrifice company car scheme .
Reimbursements for Business Mileage
From September 2018 , HMRC introduced advisory fuel rates ( AFRs ) for electric vehicles allowing employers to reimburse electricity costs for company cars at a rate of 4p per mile .
It is also worth remembering that Approved Mileage Allowance Payments ( AMAPs ) apply to electric cars in the same way as for petrol or diesel cars . For individuals using a private electric car for business purposes , reimbursement can still be provided tax-free at a rate of 45p per mile for the first 10,000 miles and 25p per mile thereafter .
Next steps
If you would like further information regarding electric vehicles and the tax considerations for your business , please get in touch with your local Azets contact .
Local offices : Ashford : 01233 629 255 / Canterbury : 01227 454 861 Maidstone : 01622 690 666 / Orpington : 01689 827 505 Sandwich : 01304 249 997
Accounting | Tax | Audit | Advisory | Technology www . azets . co . uk
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