April heralds the beginning of a new tax year and before 6th July, employers will be putting together returns related to benefits and expenses and settling any Class 1A National Insurance owed to HMRC.
In recent years, HMRC has sought to tax company cars almost out of existence, however we are seeing a resurgence of the company car due to the significant tax advantages which have been bestowed upon electric vehicles for both businesses and individuals.
Here, Andrew Diver, head of taxation at Beatons Group, gives a general overview of some of the taxation benefits of electronic vehicles to both companies and their employees.
Benefits to the company:
If an electric vehicle is purchased either outright or by finance and is new and fully electric then it is eligible for the 100% Annual Investment Allowance, provided the total capital expenditure by the company in the accounting period, is within the allowable limit of £200,000.
However, the company would not be able to claim back the VAT if there is any private use because the vehicle is a car.
If the car is leased rather than purchased and is new and fully electric, then the company will be able to claim all the lease payments without any restriction. Additionally, 50% of the input VAT can be claimed back on leased cars which have private use.
Individual:
When considering the individual, we are taking into account the rules of ‘benefit in kind’. If the car is fully electric and has no CO2 emissions figure, then the benefit in kind will be 2% of the list price for this tax year (2022/23) and the next two tax years. As electricity is not a fuel then there is no fuel scale charge.
For example, the benefit in kind on a fully electric car with a list price of £35,000 would therefore only be £700 which would result in tax for a basic rate taxpayer of £140 or £280 for a higher rate taxpayer.
Electric Charging point:
The company would be eligible for 100% Annual Investment Allowance on the equipment for the charging point provided it is unused and not second hand. The total must also be within the capital expenditure of the company and the accounting period within the allowable limit of £200,000.
This currently applies for expenditure on electric charging points before 31st March 2023, but it may be extended again as it has been previously.
Charging others to charge:
Supplies of electricity to third parties would be vatable at standard rate. VAT input claims would be restricted for private use by employees.
All employees should keep records of business and private use of the electric cars which have been charged at work.
Any income from the charging point would be treated as other income.
Some care is needed when offering vehicle charging commercially as regulations regarding the provision of electric vehicle charging points are due to be introduced from June 2022.
This requires that the systems have some element of smart charging - for example - optimal charging during off-peak times.
At Beatons we are always happy to give tailored advice to help ensure businesses understand the tax implications of company cars and employee benefits. Please contact us via email info@beatons.co.uk or call 01473 659777.