Q I want to buy an electric car: should I put it through the business?
A: In a word, yes. In the past, given the high tax consequences, I have regularly advised clients against putting their car through the business: only on the rare occasion does it make sense.
If it is an electric car, though, or even a hybrid, there are now plenty of tax incentives to put it through the business. If you choose a brand new electric car you would get a 100 per cent allowance for tax purposes in the year that you buy it. If you buy secondhand you do not get quite the same incentive, but you can have normal pool capital allowances (18 per cent) better than for a petrol or diesel car (6 per cent).
The tax incentives to put an electric car through the business really stand out when you look at it as a benefit in kind. If it is a pure electric car, benefit-in-kind tax is only 1 per cent of the list price (it will go up to 2 per cent next year).
There is a sliding scale of benefit-in-kind tax that depends on your car’s CO2 emissions. This goes from 1 per cent all the way up to 37 per cent, so the difference is huge, especially if you are considering a car at the high end of the market. You will be in a much better tax position with an electric Tesla over a Mercedes diesel car.
The same sort of incentives exist if you are considering a fleet of electric cars for employee use so it is definitely worth considering as long as you think through the practicalities. You need to consider how employees will use the vehicles, whether they will have long journeys, how they will charge the cars (whether at home or at the office) and making provisions for charging.
There are schemes such as the workplace charging scheme under which you can get vouchers towards installation costs of electric car charging points at the business. Employees can get vouchers for having charging points installed at their homes through the electric vehicle homecharge scheme.
One (very rare) pitfall to consider is when an employee owns the car and charges their car at the business for their personal use, it can lead to a benefit in kind tax as you are basically giving them free electricity. This is unusual as most would charge the car at home for personal use, but the risk should be assessed.
The benefit in kind sliding scale will be the main factor in your decision with electric and hybrid models sitting at different points on that scale so you must know the exact CO2 emission levels of the car, mileage, impact of the purchase/rental amount among other factors.
Overall, if you want to buy an electric car I would advise you to put it through the business but make sure you and your accountant do your sums to be sure that it’s better to have it in or out of the business.
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