The number of electric vehicles on the road is increasing at a rapid rate. Thanks to the cost and tax savings offered by these vehicles, they are becoming a popular choice as a company car.

However, the rules around electric vehicles are constantly changing and evolving, and the benefits afforded to employees and businesses need to be reviewed and aligned with the latest rules.

To help you continue to stay up to speed with these changes we looked into two common queries about electric vehicles.

Car vs Van – Tax treatment of electric vehicles

There have been several important tax decisions previously regarding the difference between vans and cars, but how do the different rules regarding electric vans affect their tax treatment?

Let’s use a hypothetical:

A Ltd has acquired a new electric company van that its director, Bob, uses to go to and from work, as well as during the regular workday.

However, Bob also has the van in the evening and at the weekend for his private use. For Benefit in Kind (BiK) purposes, the company classes the vehicle as an electric van.

Unlike company cars, the BiK charge for an electric van is nil. Therefore, employees with electric company vans can, where permitted to do so by their employer, use their company van for unrestricted private use without any associated tax charge.

Unfortunately, HMRC disagrees with this judgement and argues that the van, is in fact, an electric car and not a “goods vehicle”, as defined by Section 115 ITEPA (Income Tax (Earnings and Pension) Act) 2003.

This states:
(1) In this Chapter— “car” means a mechanically propelled road vehicle which is not:
(a) a goods vehicle,
(b) a motorcycle,
(c) an invalid carriage, or
(d) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used;
“van” means a mechanically propelled road vehicle which:
(a) is a goods vehicle, and
(b) has a design weight not exceeding 3,500 kilograms, and which is not a motorcycle.
(2) For the purposes of subsection (1)…
“goods vehicle” means a vehicle of a construction primarily suited for the conveyance of goods or burden of any description;

In reaching such a decision, HMRC would need to prove that the van in question had multiple purposes, beyond just the transport of goods.

Many modern vans have been designed and are advertised as multipurpose vehicles, and there are a number on the market that have crew cabs or “kombi” roles, that allow for passengers as well as goods.

This confusing situation has been tested many times, not least in the case of Payne, C Garbett, Coca-Cola European Partners GB Ltd v HMRC at the Court of Appeal on 20 July 2020.

In this case, HMRC was able to prove that the VW Transporter T5 Kombi and Vauxhall Vivaro vehicles provided by Coca-Cola to employees were not vans, and instead served the purpose of being a car.

Examples and cases such as this can make it difficult for companies to find the most tax-efficient fleet of vehicles and can make the choice of vans and cars more complicated.

Roadside charging – How to account for credit card payments

With a growing number of company car owners using electric vehicles, many are deciding or being permitted to use company credit cards to pay for roadside charging.

However, what are the implications of this for the employee and business alike?

While the answer is fairly technical, the short simple answer is there will be no taxable benefit on the employee and no National Insurance Contribution (NIC) charge.

This is because a credit card is a credit token, not a specific means or facility for providing the electricity to charge the vehicle, and it is, therefore, exempt under Section 269 of ITEPA (Income Tax (Earnings and Pension) Act) 2003.

At the moment, electricity is not a fuel for fuel benefit purposes either, this further prevents there being a benefit under ITEPA.

To make matters more complex, this should not be confused with the provision of electricity by an employer via a workplace charging point, which is also exempt from a Benefit in Kind charge under a different section of the same Act, which accounts for the facilitation of electric charging under the fuel benefit rules.

When it comes to the NIC, a liability for Class 1 contributions exists where the credit card is paying liabilities for the benefit of the earner.

However, this is counteracted by other legislation that ensures that no Class 1 NIC arises on business expenses or where “a strange pre-purchase performance is given by the employee whereby the employee informs the seller that they are purchasing the goods or services on behalf of their employer.”

Confusing and seemingly contradictory, this has been established in prior case law, which found that when informing the seller that the fuel is being acquired on behalf of the employer, implies a shift in the purchasing dynamic.

Instead of personally buying the fuel, the employee assumes the role of an agent for the employer.

By procuring the electricity on the company’s behalf, they are no longer utilising the corporate credit card to settle a personal responsibility. Rather, they are being supplied with fuel by their employer.

This area of tax and National Insurance legislation is constantly changing and so if you have any queries about the potential charges related to company cars or their “refuelling” it is best to seek professional advice.

To find out how we can support you with the purchase and costs associated with electric vehicles, please contact us.