A company car is a desirable job perk, particularly for those who travel long distances. A company car scheme is a big decision to make for a business due to cost but can reap benefits for its employees.
Electric cars are becoming increasingly popular and more companies are now starting to enroll EVs as company cars compared to petrol- and diesel-powered cars, due to their lower maintenance costs and substantial tax benefits. In line with inflation and the cost-of-living crisis, it is now more important than ever for a business to reduce its operational costs and retain employees.
Here we discuss the benefits of offering employees electric vehicles as company cars and how this can better businesses in the long term.
As a business owner, running a company car scheme is a great incentive to appeal to and retain employees. Offering this can demonstrate to employees their hard work is appreciated and it sets an example for any new staff that may join the business. The car is also typically leased through the business, ensuring employees are not tied into financial contracts.
The company is required to then meet any MOT, servicing, or maintenance obligations. Keeping up with monthly installments and vehicle upkeep can be costly for a business, particularly those on a smaller scale, which is why a small business loan may be a feasible option to help fund any schemes in their early stages.
Low Benefit-in-Kind (BIK) Rates
All vehicle owners are required to pay vehicle tax, which is a personal tax sum dependent on the carbon emissions of the car. Benefits in-kind (BIK) are goods provided to employees by a business that are free or at a greatly reduced cost, like a company car. The taxable benefit of the car needs to be valued and the tax paid on this.
BIK tax rates are generally only a small percentage of the vehicle’s final cost but this is even smaller for electric vehicles. Currently, the rate for a vehicle with carbon emissions from 1-50g/km and an electric range of 130 miles is 1%, which is set to increase to 2% in 2022/2023, compared to 15-37% for petrol- and diesel-powered vehicles.
There are additional subsidies for employers who are prepared to make provisions for employees to charge their vehicles. Businesses can then claim back 100% first-year allowances for the cost of installing the charging facilities at the company’s premises – no BIK will come from employees using these amenities at the workplace, including those who plan to charge their own EVs not given to them by the business.
Employers can also install charging points in an employee’s place of residence without creating a BIK but the reimbursement of the electricity expended on private mileage would subsequently be taxable.