Tax advantages of electric vehicles

From an income tax point of view, the main element of the calculation applies a percentage to the vehicle’s CO2 emissions.

From April 2020, all-electric cars were subject to a multiple of 0%, but this is increasing. For cars registered before April 6, 2020, the 0% increases to 1% for 2021-22 and 2% for 2022-23.

For cars registered after 6 April 2020 the increase from 0% to 1% for 2021-22 and 2% for 2022-23 HMRC has published a table of the percentage used in tax benefits depending on the CO2 of the vehicle.

Seamus McCaffrey, Omagh-based accountant

The taxable benefit for having private use of a zero-emission van was reduced to zero in April 2021. In 2020-21, the electric van was taxed at 80% of the benefit of a normal van.

There is no taxable benefit if the van is only used for business trips and commuting, regardless of fuel type.

From April 2021, a zero-emission van is taxed at 0% of the benefit charge, so there is no benefit-in-kind charge for an electric van, regardless of its use.

The rules on capital allocations are clear. For expenses incurred before April 1, 2021, a 100% rebate in the first year was available for a new car with electric propulsion or which emitted less Co2.

A car has low C02 emissions, where emissions do not exceed 50g/km. For expenses incurred on or after April 1, 2021, first-year capital cost allowance is limited to new, electric-powered, zero-emission cars.

Cars that don’t qualify for a first year of capital cost allowance are assigned to a pool based on an emissions threshold. The emissions threshold is currently 50 g/km for expenses incurred after April 1, 2021.

Spending on a car within the emissions threshold is allocated to the main rate pool, with 18% depreciating the allocation each year; expenses for a car over the threshold are assigned to a special rate pool, with 6% depreciating the allowance.

If the company installs new charging stations for electric vehicles until March 31, 2023, it can claim 100% of these costs.

In relation to VAT, HMRC recently issued Revenue & Customs Brief 1/22 which sets out HMRC’s intention to review issues relating to commercial use.

There are different VAT rates applied to the supply of electricity used for charging vehicles depending on the location of the charging point.

When the car is recharged at home, the supply will normally be subject to the reduced rate of 5%. When charging an electric vehicle at work or in a public place, it will normally be a standard charge.

Once HMRC has completed its review, further updates will be released.

For more information, phone (028) 8224 1515.