What are the tax advantages of electric vehicles for NI farmers?

An accountant from Co. Tyrone highlighted the specific and growing tax benefits of electric vehicles for farmers.

According to Seamus McCaffrey, based in Omagh, electric cars are becoming more and more accessible.

“The government now offers several tax advantages for low-emission vehicles. As a result, their popularity keeps growing,” he said. Agriland.

However, there are income tax and VAT implications to consider when buying such a vehicle, he advised.

“From an income tax perspective, the main element of the calculation is applying a percentage to the carbon dioxide [CO2] vehicle emissions,” McCaffrey said.

“From April 2020, electric-only 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 [Revenue and Customs] published a table of the percentage used in the tax benefits depending on the carbon dioxide rating of the vehicle,” he added.

Electric vehicles

McCaffrey went on to point out that the taxable benefit for 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 profit of a normal van. There is no taxable benefit if the van is only used for business trips and daily journeys, regardless of the type of fuel,” he said.

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

According to McCaffrey, the depreciation rules are clear. For expenses incurred before April 1, 2021, a 100% allowance in the first year was available for a new car that was electrically powered or had lower CO2 emissions.

A car is deemed to have low CO2 emissions when these do not exceed 50g/km.

For expenses incurred on or after April 1, 2021, the first-year capital cost allowance is limited to new, electric-powered, zero-emission cars.

Cars that are not eligible for first-year capital cost allowance because they are assigned to a pool based on an emissions threshold.

The UK emissions threshold is currently 50g/km for expenditure incurred on or after 1 April 2021.

Spending on a car within the emissions threshold is assigned to the main fare group; 18% write on allowance each year. Expenses for a car over the threshold are allocated to a special rate pool, 6% depreciation.

Electric charging

“Where the company installs new electric vehicle charging stations through March 31, 2023, it can claim 100% of those costs,” McCaffrey continued.

“With regard to VAT, HMRC has recently published a Revenue and Customs Notice which sets out its intention to look into the 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.

“Where the car is charged 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 charge standard.

“Once HMRC has completed [its] review, there will be further updates released,” he said.