Electric Car Schemes for Businesses: All You Need to Know
Electric Car Schemes for Businesses: All You Need to Know
With talks of net zero targets and the importance of greener business practices growing in severity, many companies are trying to find sustainable and eco-friendly alternatives wherever possible.
Also, with the 2030 ban on new petrol and diesel cars on the horizon (NB: recently this has been revised to 2035, although the Labour Party have promised to reintroduce the deadline to 2030 if they win the next General Election) electricity is the undeniable future of business motoring.
Many business owners are seeking proactive and beneficial ways they can transition their petrol or diesel-powered vehicles into electric ones, and for most, this shift feels a bit like unfamiliar territory.
How should businesses approach implementing an electric car scheme? What UK government grants or tax incentives are available to help fund it? Furthermore, will switching to electric vehicles save companies money in the long run? What about leasing electric vehicles for businesses and the total cost of ownership implications?
The business tax experts at Hamlyns have compiled this guide to help you understand everything you need to know about transitioning to electric vehicles and all the important tips that can help you get the most out of your business’s electric vehicle scheme. Read on to find out everything about EV government grants, tax incentives, leasing options, charging solutions and calculating the total cost of ownership.
Government Grants for Electric Vehicles
One of the biggest barriers preventing businesses from making the switch is the higher upfront cost of electric cars compared to petrol or diesel cars.
However, it’s important to note that there are several government grants available from OZEV to help bridge that gap, which some businesses could be entitled to. These include:
Plug-In Grants
Some electric vans can be sold at a 35% discount, capped at £2,500 for small vans and £5,000 for large vans. This also includes a £16,000 discount for N2 vehicles or electric/hybrid trucks.
Workplace Charging Scheme
This provides businesses with up to £350 per socket to install EV charging points at their commercial premises. The grant intends to cover up to 75% of the total costs of EV ChargePoint purchase and installation.
These grants provide short- and long-term cost savings that can make purchasing EVs in bulk more affordable for businesses, and not to the point where it severely damages cash flow. Your company can stack the benefits of EV government grants to maximise savings wherever possible.
However, to ensure that you are meeting the recommended criteria, it’s always prudent to consult a financial expert who can offer practical advice.
Tax Incentives for Electric Vehicles
Businesses can also benefit from tax incentives when running electric company cars. These include:
- Company Car Tax – Electric cars are taxed at lower benefit-in-kind rates compared to petrol or diesel cars.
- Capital Allowances – 100% first-year capital allowances are available for purchasing new EVs until 2025.
- VAT Reclaim on Leasing – Businesses can reclaim VAT on electric car lease payments, unlike payments for diesel or petrol vehicle leasing payments.
These tax incentives enable companies to run EVs at lower tax rates compared to conventional cars.
Ultimately, again, it’s highly recommended to consult the services of a business tax expert like Hamlyns who can advise on whether you meet the relevant tax incentive criteria.
Leasing Electric Vehicles
Many businesses opt to lease rather than buy electric company cars outright. This usually comes with a fixed term with the business able to either return the vehicle to the provider at the end, or ownership is transferred directly to the company.
Leasing comes with several advantages compared to buying company cars, including (but not limited to):
- Lower upfront costs – Monthly leasing rates are often cheaper than an outright, full-cost purchase.
- Vehicle flexibility – It’s often quicker to upgrade fleets to newer EVs with improved technology, specifications and mileage allowances.
- Reduced risk – Leasing transfers residual value risks to the provider.
- Administration support – The leasing firm handles maintenance, insurance and repairs.
What About Contract Hire?
When leasing, businesses should compare options for finance leasing and contract hire to see which solution may best suit their needs. With contract hire, vehicles are returned at the end; with a finance lease, ownership is eventually transferred.
It’s similar to a situation where you were financing a personal car, whether you were considering owning the car outright at the end of the fixed term. Finance leasing is ostensibly the same as PCH (personal contract hire) where ownership is not an option, while finance lease bears similarities to HP (hire purchase) agreements. The interest and cost of vehicles are factored into the amount that you pay each month, depending on your agreement.
Installing EV Charging Solutions
When making the transition to electric vehicles, businesses will likely need to install EV charging points at their premises. This may come with additional hoops to jump through if the business does not own the premises and shares spaces with others, at which point seeking approval from the commercial landlord would be needed.
When installing electric vehicle chargers at your location, consider these important factors:
- Charger speed and power – Faster chargers over 50kW allow quicker charging but are more expensive than standard EV chargers. Some faster chargers require power supply upgrades which can come at high upfront costs.
- Number of chargers – Take into account workforce size and charging requirements for each electric vehicle user. Phase the rollout so your infrastructure matches EV uptake.
- Future-proofing – Build ‘spare’ electrical capacity for additional chargers as your team and fleet size grow.
- Grant funding – Take advantage of all possible funding options which can help towards installation costs.
Calculating Total Cost of Ownership
When weighing up the cost of petrol or diesel against electric vehicles, businesses need to compare the total cost of ownership (TCO).
Factors to include in the TCO calculation:
- Purchase price (after grants/incentives)
- Electricity and/or fuel costs (if using hybrid vehicles)
- Taxation – company car tax and VAT, to name a few
- Insurance
- Maintenance
- Resale value
- Charging infrastructure
While it’s widely believed that electric vehicles provide lower lifetime running costs for high-mileage company cars, businesses should make estimates and calculations ahead of time based on their likeliest usage patterns.
Additional Benefits of Electric Vehicles
Beyond cost savings, here are some of the other benefits your business can gain by adopting electric vehicles en masse:
- Enhanced CSR credentials – EVs enable companies to work towards sustainability targets and demonstrate green credentials, which can have a knock-on effect in boosting customer and stakeholder trust.
- Improved staff retention and recruitment – Eco-conscious workers increasingly expect employers to implement initiatives that show a commitment to sustainability.
- Lower noise and air pollution – EVs reduce noise and toxic air pollution, improving the working environment for employees.
- Reduced fleet management – With fewer moving parts, electric cars require less maintenance and servicing, meaning less disruption.
Professional Business EV Solutions Advice
With generous government support, compelling tax incentives, gradually falling EV costs and a wide range of models to suit business needs, there has never been a better time to transition your company’s vehicles to electric.
To discuss the advantages of all available tax savings and grant options, please get in touch and we will guide you through available grants, tax reliefs and the most suitable leasing or purchase options for your business.
Want to find out more? Get in touch today to start the journey towards a cheaper, cleaner company car fleet.
Patrick Collins
Tax Director
