At a glance

Businesses/Employers

Capital allowances: Sole traders, partnerships and companies

• From April 2021 electric vehicles are eligible for 100% First-year capital allowances.
  • As they are allocated to the main pool and not separate pools (assuming no private use) there may not be a balancing charge on disposal.
• The 130% Super-deduction available for companies between April 2021 and March 2023 does not apply to electric cars but does apply to commercial vehicles which would be eligible for plant and machinery allowances such as vans, lorries, tractors and taxis.
• Electric vehicle charging points are eligible for 100% allowances. The private use element should not be overlooked here as this may lead to the asset having to be separately pooled for CA purposes.

See also Vehicles (4 wheels): Allowances and Vehicles (2 or 3 wheels): Allowances

Benefits In Kind

• Normal Benefit In Kind rules apply to electric cars and vans provided to employees and the rates of tax depend on the level of CO₂ emissions. For 2022-23 this is21% of the list price.
• The list price must include the price of the battery.
• The rules are more complex when it comes to Employer-provided electric charging  (see Employees below).
• The usual rules apply regarding reimbursement of fuel costs, see Employees below.
• The current Rate per mile for a company-provided electric vehicle is 5p per mile (4p up to 1 December 2021).
• Where the employee uses their own car the mileage rate is the same as for a petrol or diesel car i.e. 45p per mile for the first 10,000 miles, then 25p.
• The electric vehicle employee owner-driver can also claim 5p per mile for each passenger they take on the same business journey.

See Company cars

Salary Sacrifice

• The 2017 changes to Optional Remuneration Arrangements (OPRA) and salary sacrifice did not apply to ultra-low emission vehicles (below 75g/km). As the benefit is based on the Benefit In Kind rate which is low for these vehicles, salary sacrifice can still be beneficial.

VAT

Normal rules for VAT recovery on the purchase or lease of a vehicle apply:

• VAT cannot be recovered on electric cars unless they are not provided for private use.
• 50% of the VAT can be recovered on leased cars.
• VAT can be recovered in full on non-leased commercial vehicles assuming no private use.
• VAT can be recovered on electric vehicle running costs such as repairs and vehicle excise duty where it applies.

HMRC’s policy on the supply of electricity for electric vehicles is:

• Supplies of electricity from public charging points are standard rated.
• VAT on the business use element of electricity taken from home charging points is only recoverable for sole traders and partners and not for employees/directors.
• Where workplace charging is provided to employees the business may recover the VAT.
  • Output VAT must then be charged on any element of electricity provided for private use as a deemed supply.
• The normal Partial exemption rules apply.
• Where the employer pays the employee for providing their own electricity for business travel in a company-owned electric car, at a rate of 5p or 4p per mile (as relevant), HMRC have indicated that the employer cannot currently reclaim input tax on this.

See:

Cars & Vans: VAT

R & C Brief 7 (2021): VAT liability of charging electric vehicles

Employees

Benefits In Kind

Electric vehicles as company cars/vans

• Normal Benefit In Kind rules apply and the rates of tax depend on the level of CO₂ emissions.
  • The 2022-23 zero-emission rate is 2%. Hybrids are charged at up to 14%.
  • The Van benefit charge for 2022-23 is nil assuming zero carbon emissions.

See Company cars and Van Benefit Charges

Employer-provided electric vehicle charging

• Where the employer provides a charging point at or near the business premises:
  • There is no taxable benefit for a company car even with private use allowed.
  • From April 2018 no taxable benefit where the car belongs to the employee assuming the charging point is available to all employees.
• Where the employer provides a charging point at the employee’s home:
  • No benefit where the car is a company car.
  • Benefit where the employee uses their own car based on the cost to the employer.
• Where the employer pays for a charge card to allow the employee to charge their car:
  • No benefit where it is a company car.
  • Taxable benefit based on cost where the car is the employee’s own.

See Company cars

There are two schemes, the Workplace charging scheme and the Electric Vehicle Home charge scheme which provide vouchers/grant towards the cost of installing charging points.

See Plug-in car, van & motorcycle grants

Mileage allowances and reimbursement of fuel costs

The usual rules apply regarding reimbursement of fuel costs.

• The current rate per mile for a company-provided electric vehicle is 5p per mile.
• Where the employee uses their own car the mileage allowance rates are the same as for a petrol or diesel car, 45p for the first 10,000 miles then 25p.

See Authorised mileage rates (own car drivers) and Advisory fuel rates (company car drivers)

Other areas to consider

Grants

There are government grants available between £500 and £25,000 for certain electric vehicles.

See Plug-in car, van & motorcycle grants

Vehicle excise duty

No vehicle excise duty applies to pure electric vehicles with no emissions.

Useful guides on this topic

Plant & machinery (self-employed): Allowances
A person who is engaged in qualifying activities is able to claim plant and machinery allowances when they incur qualifying expenditure.

Plant & machinery: Allowances
What capital allowances are available on plant and machinery? How do you calculate them? What are qualifying activities?

Super-deduction & First Year Allowances
What is the new Super-deduction allowance? When does it apply and what is the rate of allowance? What other First Year Allowances (FYAs) are available?

Company cars
Company car tax: How do you work out car benefit? How do you work out car fuel benefit? Are there savings for low-emissions vehicles? How do you reduce car benefit? Cars and the tax tribunals and Top Tax Tips.

Cycle to Work Scheme
The Cycle to Work scheme permits an employer to provide cycles and/or associated safety equipment to employees tax free.

Vans and Commercial vehicles
What is the benefit in kind charge if you drive a company van? What is van fuel benefit? What is the tax on zero-emissions vans.

Cars & Vans: VAT
What is a car for VAT? What is a van for VAT? What VAT can be recovered on a car that is bought? Leased? What about fuel? Or mileage reimbursements? 

VAT Toolkit
This is our summary version of HMRC's output and input VAT toolkits, our version includes more detail, topics and planning points.