With the Government encouraging us to be greener when it comes to our cars, there are some tax advantages currently available and due to be introduced for company electric cars.
COMPANY CAR TAX RATES
The Government has announced new tax rates for company electric cars coming into effect from 6 April 2020. Zero emission cars purchased during the 2020/21 tax year with a pure electric mile range of 130 miles or more, will be subject to a 0% tax rate when calculating a company car benefit, effectively meaning there will be no benefit in kind. The rate will increase to 2% in 2021/22. This is significantly better than the 16% charge currently in effect. Pure electric company cars purchased before 6 April 2020 will also benefit from the new tax rates as the rate will be set at 2% for the three tax years to 2022/23.
Another advantage of providing electric cars as company cars is that a fuel benefit charge does not apply, as electricity is not treated as fuel in tax law. This can be a big cost saver as a fuel benefit charge can be quite expensive.
Whilst a fuel benefit does not apply, employers may wish for their employees to reimburse them for private journeys travelled in their company cars. Previously, this has been difficult to achieve as employers could not use the advisory fuel rates (AFR) as this only applied to cars with combustion engines. However, from 1 September 2018, HMRC have introduced a new AFR for fully electric cars of 4p per mile.
ELECTRIC CAR CHARGING STATIONS
Employers can also provide charging stations for electric cars to be charged, without a benefit in kind charge. If an employee is using a company car, a charge station can be installed at either the workplace or their home. If an employee wishes to charge their personal electric car, they can charge the car at their workplace with no tax implications, but if a charge station is installed at their home, a taxable benefit in kind will arise.
There are also tax advantages to buying electric cars and electric charging stations in terms of capital allowances.
If a new electric company car or low-emissions car up to 50g/km is purchased by a business, the business can claim 100% First Year Allowances (FYAs) on the vehicle. FYAs are allowable currently until 31 March 2021. This does not apply to the purchase of second hand vehicles.
FYAs are also currently allowable on the purchase and installation of new and unused electric vehicle charging points. This was originally only available until 31 March 2019 for companies and 5 April 2019 for non-incorporated business, however, it was announced at Budget 2018 that FYAs have been extended to 31 March/5 April 2023.