When it comes to offering your staff company cars, the common drawback is that often they create more personal tax liability than they save on the company’s corporation tax bill, meaning many employees choose to opt out of having one altogether.
This is because employees taking company cars are liable to pay ‘Benefit in Kind’ (BiK) tax to reflect the monetary value of this perk.
Whilst this varies depending on the vehicle, it can usually be more cost-effective for employees to use their own car and claim back the mileage instead.
This has meant dwindling take-up and companies missing out on the benefits of offering company cars, namely attracting employees, deductible repair and maintenance expenses, capital allowance reliefs and reclaiming VAT if purchasing, branding and reputation reasons.
However, this could all be set to change due to tax exemptions on electric and low emission vehicles being introduced from 6th April 2020
From 6 April 2020 until 5 April 2021, full battery electric vehicles (BEVs) will pay no Benefit in Kind rate. This compares to 37% at the opposite end of the emissions scale.
This 0% rate also applies to company car drivers in pure electric vehicles registered prior to April 6, 2020. Additionally, the 0% rate will also apply to company cars registered after April 6, 2020, with emissions from 1-50g/km and which have an electric mile range of 130 miles or more. Both will increase to 1% in 2021/22 and 2% in 2022/23.