15 Jun Electric Company Cars – Are They Still Tax-efficient?
The taxation of vehicles is created in such a way as to promote the use of automobiles that are low-emitting. Directors and other employees who enjoy company vehicles have met significant tax charges, more so for cars aspirated normally. Electric vehicles have become an attractive option from a tax viewpoint. Even so, when it comes to electric company cars – are they still tax-efficient?
For businesses considering battery-powered vehicles, the most important considerations revolve around the availability of charging points, purchase costs, and whether the range of the automobile can serve the set purposes. Only when these considerations are met can actual benefits be accrued.
In the UK, for the 2020-2021 tax period, battery-powered automobiles accrued no tax liability. Even though the rate has risen to 2% since April 6, 2022, it is still a low figure.
When a business acquires an automobile through the purchase of a new unit, year allowances of up to 100% can be enjoyed. The biggest challenge is determining the salary that should be sacrificed for the vehicle. Leasing the car provides precise estimates of the actual cost to the business.
Employees can enjoy great benefits when they sacrifice their salary to acquire a battery-powered vehicle compared to when they choose to purchase the automobile personally. The benefits favor the employers too or leave them in a neutral position.
Purchasing a battery-powered vehicle through the business can mean offsetting some of its costs against the corporation tax. For traditional vehicles, the deduction is usually applied for some period of time. With battery-powered automobiles, total deductions can be claimed in the year of purchase.
The VAT that is reclaimed on battery-powered vehicles applies when it is used for business only. In many cases, the normal commute between the office and home is regarded as being personal.
For businesses that opt for electric cars, significant savings can be accumulated compared to ordinary vehicles. In many cases, it is cheaper to take the battery-powered automobile as a company vehicle with plans for salary sacrifice.