Company cars are one of the most common taxable benefits provided by employers but the high P11D benefits arising on petrol and diesel cars have made them a less attractive employee incentive in recent years.
The tax treatment of company-owned electric cars is much more favourable although there are various areas for consideration which may not be straightforward, such as the recovery of input tax on charging costs.
A current opportunity to be aware of is the 100% up-front corporation tax relief for the cost of a new electric car purchased before 31 March 2025. This valuable 100% first-year allowance may also be claimed on expenditure on charging points before 31 March 2025 provided they are available to all employees.
Different issues arise where the employee uses his or her own electric vehicle.
For example, a key point to note is that an employee will not suffer an income tax charge if the employer provides charging facilities at or near the workplace which are used to charge the battery of the employee’s own vehicle (including a vehicle used by the employee as a passenger) provided that the facilities are made available generally to the employer’s employees at that workplace.
However, if an employer reimburses an employee for charging their own electric car away from the workplace, the amount paid/reimbursed by the employer will be taxable on the employee. The employee should then either submit a claim for business mileage using HMRC approved rates (45p/25p) or base a claim on the actual cost of the electricity used.
There will also be tax implications if an employer pays for the installation of a charging point for an employee-owned car at the employee’s home.
It is clear from the above that the rules are complex. Please do contact us if you would like to discuss this further and ensure you are maximising all available reliefs.
You can contact your usual advisor or call us on 01633 810081 or email info@kilsbywilliams.com
