Date of publication: June 2020
Drivers of zero emission vehicles will benefit from the 0% rate for the tax year 2020 to 2021. This 0% rate also applies to:
The rates will increase to 1% in 2021/22 and 2% in 2022/23
For companies that wish to purchase rather than lease their cars, cars with CO2 emissions of less than 50g/km are also eligible for 100% first year capital allowances. This means you can deduct the full cost from your pre-tax profits.
VAT on a new car can only be claimed if it is used only for business. The car must not be available for private use, and you must be able to show that it is not, for example it is specified in your employee’s contract.
Salary sacrifice is where your employee agrees to give up part of their pre-tax salary in exchange for a benefit from their employer. A salary sacrifice scheme will allow the employee to drive a fully electric company car, by forgoing a portion of their gross salary. The amount will be deducted before tax and National Insurance contributions are applied.
A salary sacrifice scheme will allow the employers to offer employees a new car at a lower cost with a tax-efficient payment method. Additionally, the company should also benefit from reduced National Insurance contribution payments.
Disclaimer: This note does not contain a full statement of the law and it does not constitute legal advice. Please contact us if you have any questions about the information set out above.
Copyright © 2013 - Oury Clark.