I have always been interested in electric cars. Why? I don’t really know, but if there is a newspaper or magazine article on the subject, I will normally devour it with great relish!
I feel that if an employer provides a fully electric company car for a director or employee and they have unlimited private use of it, their tax position is truly incredible!
My neighbour, Alan works for a big construction company in a managerial capacity. He recently took delivery of a brand new Genesis electrified G80 fully electric company car. I watched it being delivered. I was extremely envious!
If we assume that the list price is £65,800, then Alan will only be taxed on 2% i.e. £1,316. I believe that he is a 45% taxpayer, so his tax on this company car benefit will only be £592.
He previously told me that the car was coming and that he would have a lot of additional perks attached to it. These include:
- Unlimited private use of this company car
- His employer will fully insure it for such private use
- His employer will pay for repairs when necessary
- It will be valeted weekly, with the cost being met by his employer
Alan obviously does not have the financial outlay of £65,800 to buy the car.
He will have peace of mind… if somebody crashes into the car, whilst he is shopping at Waitrose at the weekend, and drives off, Alan just telephones the car company…And the car will be promptly taken away and repaired. In the meantime, he will immediately be given a replacement. Alan will receive free charging up of his company car at work. His employer has also installed a charging point at his home. He will also not have to financially bear the depreciation of the car.
This is an incredible package, all within the tax charge of £592! The insurance alone far exceeds that!
I present a tax update lecture regularly attended by partners of a big law firm. We chat at the breaks. They have told me that they regularly offer salary sacrifice to their employees. The employee can agree to reduce their salary and get a fantastic fully electric company car instead. The tax and NIC savings are amazing. This is very popular! At the same time, the law firm pay for late night taxis to take employees home if they work late on cases until after 9pm. These taxis are tax-free!
Finally, Alan told me that his construction company have recently acquired six fully electric vans for the employees to use during the day on business. They allow the employees to take electric vans home at night and use them privately in the evenings and weekends. Some even use them to go to the away football games, supporting their Premiership team. The taxable benefit in kind for the private use of these electric vans is nil…that’s right, no tax to pay!
For other employees, the company is about to bring in the ‘Cycle to Work Scheme’. I personally have witnessed a lot of employers introducing this, and it has been very popular with the staff. High tax and NIC savings as well as healthy employees!
There is a lesson to be learned from all of this…introduce benefits and packages for directors, managers and staff such as the ones I have mentioned, have a happy workforce, and achieve big tax savings!
Here at Gravita, we could help you implement some of these and advise, particularly for example, on salary sacrifice arrangements. To discuss the contents of this article in more detail, get in touch with Tim Palmer, Tax Consultant or contact us.