Company cars: the wider benefits of electric

In the second of this six-part series looking at electric company cars, Kevin Chowings, head of the Future Mobility Group at NatWest, assesses the benefits to both employee and business.

  • Increased adoption of electric vehicles is good for corporate purpose 
  • Providing an electric company car has a cost benefit for staff
  • A more sustainable car is cost-efficient for the company

If motivation of staff falls then both customer service and experience drops, threatening sales and profit. In essence, social responsibility is as vital as responding to customers.  

With the UK transport sector being the single largest contributor to CO2, staff are increasingly asking employers what their company is doing to support reduction. While not an entirely novel development, responding to this challenge places an additional demand on top of more traditional things like improving benefits. But thanks to changes in tax legislation, both of these can be tackled with the same intervention, and with the added benefit of cost reduction.  

Staff can make a direct contribution to reducing their CO2 footprint, and the company’s CO2 footprint is also reduced

Welcome, the electric company car

Company cars have somewhat fallen out of favour as a mechanism for providing staff benefits due to benefit-in-kind (BIK) tax. An ever increasingly complex calculation, and an ever-increasing tax burden on company cars, nearly killed them off. However, today it is possible to provide staff with an electric car via a company car scheme for a far lower BIK rate.  

How might this work? Last time we took a deep dive into how BIK works. To recap, briefly consider the following examples: 

  1. Jane falls into the 40% tax bracket and drives a personally owned diesel-powered 2016 VW Tiguan that travels 12,000 miles per year. If she was able to take a company car and picked an equivalent electric model – say, a Kia e-Niro – then she would save £300 per year through salary sacrifice and reduce CO2 by three tonnes each year. On top of this, she will have a new car with all the connectivity and safety benefits that entails.  
  2. Gaurav pays 20% tax, leases a Mini Cooper S and drives 10,000 miles a year. Moving to an equivalent company car, a Mini Electric, would save him £500 a year and cut two tonnes of CO2 a year.

In each of the above scenarios the salary sacrifice nature of company car schemes means that the employer saves money too; £1,100 for Jane and £850 for Gaurav.

Careful calculations

It isn’t 100% straightforward, though. The administrative costs of establishing a car for a small business may be challenging, and tax legislation isn’t static. For now and the next five years the BIK tax is stable, but it may not stay that way.

Even with these possibilities in mind, it is difficult to argue against exploring the option. A new zero-emission car with no upfront costs, maintenance and running costs included, is likely to cost less than a personal lease. Staff can make a direct contribution to reducing their CO2 footprint, and the company’s CO2 footprint is also reduced. 

On the premise that staff are motivated by purpose, then a company car option can support that motivation. On the premise they are motivated by benefits, this is also covered. And on the premise that you want to motivate staff on climate change, an incentive is provided by the company car.

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