Changes are being made to the way benefit in kind taxes are charged on electric cars with effect from April 2020 which will make company ownership of electric cars highly beneficial from a purely tax perspective.
In short, a company can obtain 100% tax relief on the purchase of a new electric car and the registered keeper of the car will only be taxed on 2% of the showroom value of the car. Please note that the 100% tax relief only applies on the purchase of a new vehicle.
For example, on a £60,000 car, a company would save £11,400 in corporation tax if brought before 31st March 2020 (which reduces to £10,200 after 31st March due to the rate of corporation tax reducing to 17%).
In anticipation of the changes in legislation and the general impetus toward a cleaner planet, there are a large number of new electric cars coming on to the market over the next few months, to join the established electric offerings from Tesla and Jaguar. Soon there will be electric cars for all budgets.
Vehicle charging technology is also rapidly changing and the systems in current vehicles do not match up with new developments in fast charging.
Charging infrastructure is also not extensive so planning a journey is difficult.
Whilst tax advantages seem very alluring, the fact remains that electric cars are still very expensive in comparison to petrol cars so the savings in tax may be more than the offset in vehicle prices.
As the production volumes increase, there will be economies of scale and the cost of electric cars should reduce over the coming years.
In addition, from a purely environmental perspective, the acquisition of a new electric car does in itself generate high CO2 emissions so the choice to change should only be made when your existing vehicle comes to the end of its useful life – but this is a matter of personal choice.
Personally, we are holding off from buying our electric car for at least another eighteen months.
It is also worth noting that the delivery times on electric vehicles can be as long as eighteen months, so if this is something you are interested in doing, you need to act sooner rather than later.
We strongly advise you to seek appropriate advice before taking action on any of the points listed above.
All information contained in this document are correct at the time of writing. Legislation and regulations may change at any time.
If you are in any doubt, please call us for clarification.
About us: Leggate Associates Limited was formed by Andrew Leggate LL.B FCMA FCA CGMA who has over 35 years of tax and accountancy experience in industry and practice, and the practice is managed by Joanne Leggate FMAAT ATT. Our clients range from building subcontractors to multi-million pound concerns and high net worth individuals all over the UK. Please see our website www.leggateassociates.co.ukor follow @LeggateAssoc on Twitter for occasional updates.
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