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Electric cars exempt from company car tax from 2010

Alistair Darling announced in today’s Pre-Budget Report that electric cars will be exempt from company car tax from April 2010 for five years.

This means that company car drivers will pay 0% benefit-in-kind tax if they buy an electric car.

Electric vans will also benefit from van benefit charge exemption over the same period, plus the introduction of a 100% first-year allowance for companies purchasing electric vans, enabling them to offset the cost of buying an electric van against their corporation tax bill in year one.

Green-Car-Guide believes that this is a positive initiative. Although there is currently a limited choice, electric vehicles are available now, with lots more planned. So any financial incentives that help to stimulate the market are a good thing, and a five-year tax exemption period provides an element of long-term incentive for businesses wanting to buy electric cars and vans. Electric vehicles are already exempt from vehicle excise duty (VED).

It should be remembered that government subsidies of up to £5000 for electric vehicles will not be available until April 2011. Companies such as ECC, which has its Citroen C1-based electric vehicle available today, along with Mitsubishi, whose i-MiEV will be available in 2010, would obviously prefer this grant to be available from April 2010.

Meanwhile, there will be a significant increase in the fuel benefit scale charge from next April which should result in the majority of employees giving up this system for fuel to be paid by the company. This will mean that employees will be paying for fuel used privately out of their own pocket. And remember that VAT will return to 17.5% on 1st January which means the current price of a litre of unleaded petrol will go up by 2.5p. There’s also a 1p above inflation rise already planned for April.

Watch out for action being taken over the next year to expand the UK’s electric car charging infrastructure in anticipation of the arrival of a greater choice of electric cars in 2011 and 2012.