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There has been a decrease in popularity of fossil -fuelled company cars, even hybrids, due to increasing B-I-K rates. However, the tax system has, for many years, rewarded the purchase of low emission cars over their gas guzzling rivals and as from the start of the 2020/21 tax year took an even bigger step to becoming more attractive.
So should you or your clients consider the provision of electric vehicles as a perk to themselves or employees and take advantage of the current low B-I-K rates and other financial benefits? Two quick case studies suggests it’s worth a good look:
Employees – Salary Sacrifice
The provision of an electric car by an employer can also be funded by the employee sacrificing salary to cover the lease costs of the vehicle. A B-I-K on the provision of the car is still calculated as normal, but overall the cost to the employee is far less than if they funded the car themselves.
Whilst not as outwardly attractive as a fully paid company car, for anyone wishing to have an electric car but the employer does not wish to meet the full cost of it, then this can be used as an attractive option for the employer as it saves them Class 1 Employers NIC on the salary (but will pay Class 1A NIC on the lower B-I-K), as well as the employee receiving both PAYE and NIC on the cost of the effective lease compared to if they self financed the car.
If a fleet of electric cars were provided, the potential cost savings to a company can mount up considerably, when other tax reliefs are taken into account, and make the proposition both financially, and environmentally, attractive. At ETC Tax we can help you consider the savings and how this can be offered to both you and your clients businesses.
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