If you are considering buying an electric vehicle into your company, you need be aware that the current tax benefits will start to be eroded over the next 5 years, and you may be financially better off with a low CO2 emission petrol or diesel vehicle.
The main change is in the benefit in kind rules for electric cars and vans, which will impact on both the company and the employees.
Currently, electric vans do not give rise to a benefit in kind, compared to a flat annual taxable benefit of £3,000 for a petrol/diesel van (£3,500 if fuel is provided). However, starting from 2015/16, electric vans will attract a benefit in kind of 20% of the £3,000/£3,500 benefit, rising each year. This means that by 2020/21 electric vans will give rise to the same benefit in kind as petrol/diesel vans.
The situation is no better for electric cars within a company. Currently, zero emission vehicles do not give rise to a benefit in kind. From 2015/16 these vehicles will start to give rise to a benefit in kind. By 2018/19 the annual taxable benefit is set to be 13% of the list price of the vehicle, where the list price excludes the current government subsidy for this type of vehicle.
Therefore, if you are thinking of providing employees with an energy efficient vehicle, you may want to look at a cheaper to buy petrol/diesel vehicle with a lower list price. This will mean a lower capital outlay for the company, and lower benefit in kind for the employee.
We’d be pleased to work through your vehicle purchasing plans, to ensure no unexpected surprises over the coming years.