Lines of duty: an Ultra Low Emission Vehicle tax guide
Feature
Ultra Low Emission Vehicles (ULEVs) not only deliver low running costs, but are kinder on the wallet when it comes to tax, too. Next Green Car calculates the tax advantages offered by ULEVS.
While there are a number of reasons to use a plug-in car or van as a company vehicle, perhaps the most compelling are those involving cost. Ultra Low Emission Vehicles (ULEVs) – which include pure battery-electric (BEV) and plug-in hybrids (PHEVs) – can deliver huge savings to both individual and fleet users when you combine low running costs with the tax incentives on offer.
Tax advantages
The tax advantages of ULEVs include reduced Benefit in Kind (BIK), exemption from road tax (VED), and for some business types, 100 per cent First Year Allowances. These benefits are in addition to the UK’s Plug-in Car Grant (PiCG), details of which can be found in GreenFleet issue 92.
Under the current PiCG scheme, the government provides £4,500 for the purchase of a new BEV, with PHEVs discounted by £2,500 (as long as they cost less than £60,000 OTR).
The PiCG is eligible for both private and business users so, as long as the car is eligible and recognised as such by the Office for Low Emission Vehicles (OLEV), it doesn’t matter how the vehicle will be used.
Likewise, current rates for Vehicle Excise Duty, which applies to all users, are zero for all vehicles emitting less than 100g/km CO2. Being defined as having 75g/km CO2 or less, all ULEVs are therefore zero-rated. Although it’s a relatively small incentive, this benefit is to be welcomed as VED costs can rack up quickly when operating a fleet.
Key incentives
One of the key incentives to encourage the uptake of ULEVs is that delivered through low Benefit in Kind (BIK) rates. In the lowest emission category, for example, cars emitting 0-50g/km CO2 have a BIK percentage of just seven per cent for 2016-17, rising to nine per cent in 2017-18 and then 13 per cent in 2018-19. These rates compare to 15 per cent, 17 per cent and 19 per cent for the greenest petrol cars over the respective financial years (see below for ULEV/non‑ULEV comparisons). BIK tax benefits also apply to goods vehicles – the Van Benefit Charge (VBC) for zero-emissions vans is set at 20 per cent of the charge for conventionally fuelled vans for the two tax years 2016-17 and 2017-18, increasing to 40 per cent for 2018-19. As with cars, these advantaged BIK rates for e-vans reduce employee tax bills and business NI contributions.
First Year Allowance
However, it’s not just BIK rates that benefit businesses. With the exception of short‑term rental fleets, new ULEVs are eligible for 100 per cent First Year Allowance until March 2018 potentially providing company savings worth thousands of pounds. (From April 2018 to March 2021, the FYA threshold will reduce and will apply to cars emitting up to 50g/km CO2.)
Another tax advantage offered by ULEVs concerns fuel. There is no duty currently levied on electricity used as a road fuel, energy costs are generally much reduced with a typical electric car only costing 3-4 pence per mile for fuel. In addition, as electricity is not considered a fuel by HMRC, there is no fuel benefit charge for employees who may charge an EV at work. Businesses are therefore more able to pro-actively promote ULEVs for commuting as well as company use.
