I must admit that I have not been a fan of electric cars, my perception being that there are very few options, they are very expensive, and their range is very limited, notwithstanding the lack of suitable charging points.
As I have done a bit of research, however, I must admit that I’m changing my mind. Top Gear has published its top 20, so that immediately told me that there are a lot more electric cars about than I initially thought. In due course, you’ll even be able to have an Italian supercar, as Lamborghini has confirmed it will be producing hybrid vehicles in 2023, and post 2025, they will have a fully electric vehicle. Start saving now!
There’s no doubt that electric vehicles (EVs) are the future and every manufacturer will have to start producing EVs, if they’re to survive. There are also more and more electric vans, and you probably already know that Amazon operates a fleet of electric vans. In addition, Citroen is producing a small EV called an Ami Cargo which costs 25 euros a month, has a top speed of 30mph, a range of 47 miles and can carry a load of 140 kilos. It features a storage shelf that can double as a desk for the driver and only has one seat, creating a niche market.
If you’re thinking electric and want to do a bit of research, this website seems to offer a lot of useful information:
The Government is also encouraging the move to EVs with generous tax deductions for such vehicles. In 2019/20, fully electric vehicles were taxed as a benefit at 16% of the list price, and for 2020/21, this was reduced to nil. So, for a typically priced EV of £70,000, the benefit went from £11,200 to nil. For the current year, 2021/22, it is 1%; for 2022/23 2%; and in the March 2021 Budget, the Chancellor confirmed that the 2% rate would continue for 2023/24 and 2024/25.
A company that provides an EV for its director/employees can claim 100% capital allowances on purchase. It must be new and the list price would need to include the cost of a battery, if it’s purchased separately.
Additionally, there is a government ‘plug in’ grant, restricted to 35% of cost and capped at £3,000, if certain conditions are met. All fully electric vehicles will qualify but most hybrids will not, because of their limited range.
There is also a government grant for electric vans; 20% of the purchase price, up to a maximum of £8,000. They must have CO2 emissions of less than 75g/km and be able to go at least 10 miles with nil emissions.
Electricity supplied by an employer is not treated as fuel and so no taxable fuel benefit charge is made. If a business installs charging points for EVs at the workplace, they can claim 100% tax allowance for this. The charge point must be at or near the employer’s workplace and available to all employees. The charging facility must be for a battery of a vehicle in which the employee is the driver or passenger.
If you have a company EV, which you charge at home:
- If this is reimbursed by the employer, you will be taxed as earnings.
- If you do business miles, you can claim 4p per mile.
If an employee owns and runs an EV, they can claim the usual tax-free allowance of 45p per mile for 10,000 miles and 25p per mile thereafter.
Electric vans
From 6 April 2021, there’s a zero van benefit charge for employees who drive a fully electric van and use them privately.
HMRC are looking at whether vans are indeed vans! This is usually based on their designed purpose, and so, when considering this option, you must make sure that the vehicle is classed as a van, i.e. a vehicle primarily designed for conveying goods.
Electric Bicycles
Employers can provide electric bicycles under the ‘Cycle to Work Scheme’. You don’t have to actually cycle to work but this is a tax efficient way of purchasing such a bicycle. The employee repays the cost of purchase as a loan, but this is deducted from gross pay and so a saving of tax and National Insurance up to 32% is made.
Electric motorbikes
There are no specific tax advantages for an electric motorcycle; this is taxed at 20% of its value, plus any running costs.
In conclusion, you will see that having an electric vehicle via a limited company is a very tax efficient way of acquiring such a vehicle and I’m seeing a significant number of our clients using this route. I do, however, recommend that you seek professional advice before proceeding with such a purchase, so that you’re advised of all potential tax consequences.
Sole traders and partnerships
There are no special incentives for EVs. You can operate the simplified expenses, i.e. 45p per mile for 10,000 miles and thereafter at 10p per mile (motorcycles 24p per mile). You cannot claim capital allowances, if using this method.
The alternative is to make a claim, capital and expenses, based on the proportion of business to private mileage.
If you have any queries, you can contact me on 01473 833411 or peter.glading@larking-gowen.co.uk
Peter is the Guild’s accountant.
This article is designed for the information of readers. Whilst every effort is made to ensure accuracy, information contained in this article may not be comprehensive and recipients should not act upon it without seeking professional advice. “Larking Gowen” is the trading name of Larking Gowen LLP, which is a limited liability partnership registered in England and Wales (LLP number OC419486). Where we use the word partner it refers to a member of Larking Gowen LLP. © Larking Gowen.
