Electric Vehicles & Charging Points – Brief 2022/23 Tax Guide
Electric Cars (Zero Emission)
There remains a significant advantage in buying an electric (zero emission) car through a limited company and providing this to a director/employee as a benefit-in-kind. Care is however needed to ensure that you maximise the reliefs available.
The company can buy the car (either cash or hire purchase) and claim all the related costs of the vehicle. New electric cars qualify for 100% FYA (first year allowance), enabling you to write-off the entire cost in the year of purchase.
The director/employee provided with the car for personal use will pay personal tax based on the value of the benefit (a “benefit in kind”), which is calculated as a percentage of the original list price of the vehicle.
The percentage for a 0g/km vehicle for the year to 5 April 2023 is 2%. The percentage will remain fixed at this level for 2023/24 and 2024/25.
For example, if the original list price of the vehicle is £50,000, then you’d pay personal tax on 2% X £50,000 = £1,000 per annum.
Low Emission Cars (Plug-In Hybrid)
While plug-in hybrid cars do not provide the company with the ability to write-off the entire cost in the year of purchase, they still obtain writing-down allowances at either 6% or 18% and can produce a tax saving for the employee in relation to the benefit-in-kind.
The percentage used to calculate the benefit-in-kind is dependent on the electric mileage range of the vehicle. The greater the range, the greater the reduction in percentage. The table below shows the benefit-in-kind rates for plug-in hybrid cars first registered on or after 6 April 2020. With effect from this date, benefits-in-kind have been calculated using CO2 figures from the latest WLTP fuel-economy and emissions testing procedure. Separate rates apply to cars first registered before 6 April 2020.
|CO2 (g/km)||Electric range (miles)||2022/23 Rate (%)|
|1-50||More than 130||2|
|1-50||Less than 30||14|
The company can buy the van (either cash or hire purchase) and claim all the related costs of the vehicle. As commercial vehicles, new electric vans qualify for the 130% ‘super-deduction’.
A move to electric vans will benefit your employees, who will not pay any tax if the van is available for private use. You will also benefit as there will be no employer’s Class 1A National Insurance to pay either.
Please note that for the purposes of the benefit-in-kind legislation, a vehicle is a ‘van’ if it is a mechanically propelled road vehicle which is a goods vehicle, and which has a design weight not exceeding 3,500 kilograms, and which is not a motorcycle.
However, just because something looks like a van does not mean that it is, at least for tax purposes. The Court of Appeal have held that modified double-cab vehicles are cars rather than vans for the purposes of the benefit-in-kind legislation, and as such the taxable benefit should be calculated using company car rules rather than van benefit rules.
HMRC do not regard the provision of electricity as a ‘fuel’ for benefit-in-kind purposes. Consequently, no tax charge arises if the employer meets the cost of electricity for the private use of an electric van.
The company will be able to claim the new ‘super-deduction’ of 130% in relation to the cost of installing charging points at both the place of work and the home.
This deduction is available for expenditure on plant or machinery for electric vehicle charging points incurred up to and including 31 March 2023 for corporation tax purposes. The expenditure must relate to new equipment that is ‘unused and not second-hand’.
In addition, where the company pays for the installation of a home vehicle charging point that is associated with the provision of a company car, this will be free of any benefit-in-kind in your hands, and the company will still be able to claim the deduction detailed above.
Please note that if the charging point is incorporated into a building, then the situation is possibly open to interpretation. This is because HMRC may consider that this expenditure relates to ‘integral features’, which only qualify for a lower rate of deduction. I’d suggest that we have a quick chat before you go ahead, just so I can get a feel for what you might plan to do. This can be a grey area, and it would be prudent to examine things properly before incurring expenditure.
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