Green light for electric vehicle investment

Changes announced in the Budget add to the incentives for businesses investing in electric vehicles and charging points.

These tax incentives are a welcome addition to the current grant schemes for businesses and individuals to help meet the cost of EVs and their charging infrastructure in the workplace and at home. So, what has changed, and what should businesses take note of?

Tax breaks on commercial vehicles

Companies buying electric vans will be able to claim a super-deduction against their taxable profits of 130% of the cost of new vehicles.

Companies were already able to claim a 100% deduction for the cost of vans under the Annual Investment Allowance (AIA). While the AIA is limited to £1m investment per year, there is no limit to the super-deduction, which runs from now until March 2023.

The impact? A company paying corporation tax of 19% spending £30,000 on a new van would have seen their tax bill fall by a maximum of £5,700 under the previous rules. “With the 130% super-deduction, the tax saving could be as much as £7,410 based on a 19% corporation tax rate,” says Ivan Houston, director at Scholes chartered accountants.

Company electric and hybrid cars

Business cars do not qualify for the 130% super-deduction, but they do qualify for other valuable tax breaks, with the amount of the benefit depending on their carbon dioxide emissions.

The highest tax benefits are reserved, unsurprisingly, for electric and zero-emission cars. Companies buying these can deduct 100% of the cost from their taxable profits.

Costs for hybrids are pooled with other assets, with an annual deduction against profits based on the pool’s value. Cars with emissions of up to 50g/km go into the main rate pool, which receives an 18% allowance; those over 50g/km get 6%.

Tax deductions for charging points

The tax situation on investing in EV charging infrastructure is not as simple as it is for vehicles. The deduction available can hinge on whether or not the charging point is incorporated into a building, Houston explains.

“Standalone electrical charging points would be classified as main rate assets, meaning the expenditure can potentially attract the 130% super-deduction.

“But if the charging point is incorporated in the building, then the situation is more open to interpretation. The taxman may consider that this expenditure relates to ‘integral features’, which only qualifies for the lower 50% deduction, with the remainder of the expense being written down at 6% on a reducing balance basis.”

A company could argue that since the charging point is provided specifically to power electric vehicles, the charging point expenditure relates to machinery and so qualifies for the 130% super-deduction.

“Precedent suggests HMRC would favour this argument, but the introduction of the integral features rules in 2008 has muddied the waters. Companies should not assume that HMRC will automatically accept this type of claim now,” warns Houston.

If the company pays for an EV charging point to be installed at an employee’s home because the employee has an EV from the business, then the employee is not taxed on the cost of the installation. Meanwhile the company can claim a deduction for the installation cost as usual.

Grants for charging at work…

Two types of grant are available for installing charge points. First is the Workplace Charging Scheme (WCS), which businesses can claim on installing charging points at business premises. The scheme pays for up to 75% of the purchase and installation of charging points, to a maximum of £350 per socket, and up to 40 charge points across all the business’s sites. The WCS was expanded to include SMEs and the charity sector earlier this year.

Businesses applying for the WCS do not need to already have any EVs but if they don’t, they need to declare their intention to encourage EV take-up among staff or in their fleet. They also need to have designated off-street parking that is already in use.

HMRC does not class electricity as a vehicle fuel. This means that if a business decides to offer free charging, the employees are not taxed on the value of the electricity used.

… and for charging at home

Individuals wanting to charge their EVs at home can claim a second grant: the Electric Vehicle Homecharge Scheme (EVHS). The amounts available are the same as under the WCS: up to 75% of the cost of one charge point and its installation, capped at £350 per installation.

EVHS applications, like WCS, require off-street parking. They also need proof of EV ownership. If the EV is a company vehicle, this proof can take the form of a letter in which the employee’s company (or the leasing company) states that the individual will have the car for a minimum of six months from a certain date.

Kevin Chowings, head of the Future Mobility Group, explains how bank customers are supported through this process. “NatWest has a unique partnership with Octopus Energy Services, and they will collect all of this information during the application and provide all the guidance a company or individual needs,” he says. “The partnership covers everything from charging points to fleet management software and renewable assets such as solar, all managed by a single point of contact, making your journey to electric as smooth as possible.”

Making the transition to electric vehicles easy for businesses is part of NatWest’s climate purpose – and is essential if the UK is to hit its net-zero targets, says Chowings. “The grants and tax breaks are not going to be available for ever, and, with a wide range of vehicles available as well as rapidly improving public charging, now is the time for businesses to focus and plan their EV transition.”

Plug-in car grant

Meanwhile, individuals thinking of buying their own electric vehicle can benefit from the government’s plug-in car grant. This pays £2,500 towards the price of an electric car costing up to £35,000 and will be available until at least March 2023.

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