Companies go ‘Business in Kind’ on electric cars as eco revolution accelerates

Employees at companies in the UK are increasingly switching to electric cars due to a combination of environmental, tax relief and regulatory reasons, it emerged today.

Unprecedented demand is being seen by Azets, the UK’s largest regional accountancy firm and business advisor to SMEs, following a new strategic partnership with Total Motion, a major UK fleet management and leasing provider which offers salary sacrifice car schemes via trading company Pink Salary Exchange.

Richard Goddard, partner and head of tax at Azets South West and Wales, provides advice to employers looking to move away from diesel and petrol towards a green fleet, including plug-ins.

He said: “The UK’s net-zero carbon strategy is rightly focusing minds in a way we’ve never witnessed before and this is showing through increased demand for electric battery company cars. We are inundated with requests from companies keen to reward staff with a government-approved tax ‘benefit in kind’ through zero carbon or low carbon emission vehicles.

Around 90% of our advisory work on company cars used to involve internal combustion engines (ICE), with the remaining 10% covering electric – now the position seems to have reversed. The trend is toward a very strong focus on the provision of electric vehicles as part of the overall employee reward package. This seems to be the trend across the UK.Not only that, employers, with Environmental, Social and Governance on the boardroom agenda feel it is the right thing to do for the environment as we move away from polluting fossil fuels. There is the perception aspect to consider these days – pulling up to a meeting in a diesel car may leave customers wondering if your company is practising what it preaches. There’s also the regulatory side – companies are looking to pre-empt any bans on diesel and petrol vehicles in certain locations. It is perhaps only a matter of time before diesel and petrol cars are prohibited from travelling in ‘smog cities’ and it is worth bearing in mind that the government has announced new proposals which would see more than 50% of all new cars sold to be fully electric by 2028, just six years away. One more factor is also driving demand – diesel and petrol costs are at record highs.”

Demand for new electric cars is borne out by industry data – nearly 191,000 were on the roads in 2021, an 11.6% share of the new-car market in the UK.

Richard said: “According to industry forecasts, pure-electric cars are poised to make up one in six new cars on the roads this year and this will undoubtedly accelerate as the supply chain improves and the charging infrastructure grows.”

He added: “Where an employee receives a company car by reason of employment, this gives rise to a taxable ‘benefit in kind’, known as BIK. Income tax, payable by the employee, and Class 1A NICs, payable by the employer, are due on the ‘cash equivalent’ of the benefit. But conventionally fuelled vehicles are more expensive for both employee and employer – electric vehicles, and to a lesser extent, hybrid vehicles, provide significant advantages in this regard.” An illustrative example is included below.”

Azets’ strategic partnership sees the Top 10 accountancy firm provide advice to businesses on tax planning and Total Motion matching demand and marques.

Total Motion Director Simon Hill, based at the company’s headquarters in Leicester, said: “Our partnership with Azets is helping decarbonise road traffic as more companies look to the environmental, tax, staff retention and reputational benefits of pure-play electric vehicles for directors and employees. From 2030, which is not that far off the horizon, the sale of new petrol and diesel cars will be banned. That cut-off date is focusing many minds.”

Example EV vs ICE BIK comparison