NI business can now benefit by going green with electric vehicles

As part of its ‘Ten Point Plan for a Green Industrial Revolution’, the UK Government has pledged to end the sale of new petrol and diesel cars by 2030 in a bid to reduce carbon emissions.

Already, an ever-increasing number of electric vehicles (EVs) can be seen on NI’s roads, and experts at Lisburn’s Exchange Accountants expect this to increase due to the rising cost of fuels and the tax benefits on offer to businesses.

“From a tax perspective, we’ve been advising our clients to switch to an EV for some time now,” said Exchange Accountants director Conor Walls, “but with global events driving traditional fuel costs up massively, it’s now become what we call in the business, a ‘no brainer’!

“Company car drivers will save thousands of pounds from a reduced ‘benefit in kind’ charge to encourage motorists to go electric and reduce carbon emissions on our roads.

“Not only that, there is an increasing number of free EV charging points across NI, and home or office units will charge your car at a fraction of the cost of fuel, which could now cost as much as £100 for a full tank of diesel or petrol.

“Charging your EV does take a lot longer than stopping at the pumps but if you can make some lifestyle changes and plan your journeys to take this into account, then there are hundreds, even thousands of pounds to be saved on fuel – on top of any tax savings you may make.”

There are over 100 models of EV in the UK market and by 2025, the Government expects that there will be almost as many as with conventional petrol and diesel vehicles.

From 2030, all vehicles will be required to have a significant zero emissions capability and to be 100% zero emissions from 2035.

To accelerate the transition and encourage employers and employees, the Government has pledged to offer tax incentives and to improve the EV infrastructure.

Exchange Accountants has put together a few reasons why business owners should consider plugging in to the benefits on offer.

Company cars

If you provide your employee with a company car or van that is available for the employee’s private use, the employee is taxed on the resulting ‘benefit in kind’ – with the amount of tax paid depending on the list price of the vehicle and the level of its CO2 emissions. So to encourage drivers to adopt low-emission cars, drivers of electric and low emission cars pay less tax than those choosing higher emission models, while drivers of diesel cars not meeting the RDE2 emissions standard will pay an additional supplement.

For 2022/23, the amount that is charged to tax in respect of an electric company car is just 2% of the list price of the car (up to 37% for fuel vehicles) and optional accessories, as reduced by capital contributions of up to £5,000. The taxable amount is adjusted to reflect certain periods of unavailability and any contributions for private use. This low charge means that an electric company car is a tax-efficient benefit.

As an employer, you pay Class 1A National Insurance contributions on the taxable benefits provided to employees. For 2022/23, these are payable at the rate of 15.05%. So, the lower the benefit in kind tax charge for employees, the lower your associated Class 1A National Insurance bill.

Capital Allowances

Fully electric company cars qualify for a 100% first-year capital allowance so long as the vehicle is new and unused. Therefore, if your company invests in a qualifying EV, it could save corporation tax of 19% on the cost of the vehicle.

Car fuel benefit charges

HMRC does not regard electricity as a ‘fuel’ for the purposes of the fuel benefit charge. Consequently, if you provide or meet the cost of electricity for an employee’s private mileage in an electric company car, the employee will not be taxed on that provision, and there is no Class 1A for you to pay.

If an employee with a company car meets the cost of electricity for business journeys, you can make a mileage payment tax-free as long as the amount paid is not more than the advisory fuel rate at that time. Currently, a payment of 5p per mile can be made tax-free.

Workplace charging

A tax exemption applies if you provide electric charging facilities which can be used by employees to charge their cars. The exemption applies when the charging facilities are used by an employee to charge their own car or a car in which they are a passenger. The exemption is not relevant to company cars – charging costs are a connected cost of providing the car and are subject to a separate exemption. Nor does it apply if you reimburse an employee for the cost of charging their vehicle away from the workplace.

Government grants are available to help businesses install electric vehicle (EV) chargepoints for staff on their premises. The Office for Zero Emission Vehicles (OZEV) is offering businesses up to £350 towards the cost of buying and installing each chargepoint socket. Charging infrastructure grants of up to £500 are also available.

Company vans

A tax charge arises under the benefit-in-kind rules if a company van is available to an employee for their unrestricted private use. No charge arises if private use is restricted to ‘home to work’ travel. However, there is no tax charge if an employee has unrestricted private use of an electric company van. By contrast, the amount charged to tax for 2022/23 for a van other than an electric van is £3,600.

Choosing an electric company van will save an employee paying tax at the basic rate £720 in tax and an employee paying tax at the higher rate £1,440 in tax. Employers will also save Class 1A National Insurance of £541.80.

To download a free eBook on the benefits of electric vehicles for businesses, click on https://exchangeaccountants.com/ev-guide/.