Guide to buying electric company cars
When it comes to buying a company car, there are more advantages to purchasing fully electric vehicles for two reasons:
- The car attracts 100% relief for tax in the company accounts in year of purchase, whereas most prestige cars only offer offset at 8% per annum
- The salary equivalent (benefit in kind charge) for personal use of the car is significantly lower than a comparable non-electric car (1% vs 37% of the list price of the car)
When there is a benefit in kind, this triggers a tax charge for the individual who has had the usage, and also a Class 1A NIC charge for the company. This charge is based on car emissions, and a standard petrol or diesel car could create a significant charge (up to 37% of the book value). However, this charge is very low for electric company cars. For the year to 5 April 2022, the charge rate is 1% and the rate will be increasing to 2% for the year ending 5 April 2023. So, when it comes to costs and tax charges, electric is the way to go.
Charges and tax calculations by year
You can see below how the tax liability for the individual differs if you are looking at a £75k list price car that is electric or petrol – we have illustrated this using the highest emission rate of >170g/m. The BIK rate reduces as the emission rates reduce.
Determining the use of electric company cars
There will always be a benefit in kind for a car unless the car is a pooled car. In order to qualify as a pooled car there are some strict conditions, such as the car would need to be available for more than one person to use, and not be taken home at night – i.e. it must stay on a company premises.
If there is any personal use of the vehicle at all, this creates a benefit in kind and an annual P11d form is required to be submitted. If this is required, Cardens Accountants can prepare these forms for a fee of £85 plus VAT per P11d required.
Other cost considerations
There are some other considerations in relation to electric company cars:
- The government has a grant scheme in place for electric cars you can read more here.
- Charging point installation: You can normally claim 100% of the costs for the installation through your company even if the point is installed at your home. In addition, you will be able to claim 130% of the cost of the charging point as a super deduction for the installation if the charging point is new and not second hand. There will be no taxable benefit for the installation of the charging point.
- There are very few circumstances when you can claim the VAT back on a company car if it is only ever used for business and is used in the trading – for example as a taxi or driving instructor vehicle. However, if you choose to lease the car then you can usually claim back 50% of the VAT.
- If the car is treated as a company car you can claim all the car running costs and maintenance costs through the company, including all business fuel, provided that mileage records are maintained.
Count on Cardens
Please note there are different rules in relation to commercial vehicles, such as vans. If you would like any further advice surrounding company cars, please contact your usual Cardens Accountants team or contact us at 01273 739592 if you’re finding us for the first time.