22 Aug, 2018

Electric Cars - A Tax Efficient Employee Benefit

Our Tax team discusses the tax savings that can be made by employers who provide their employees with qualifying electric vehicles.

While the provision of non-cash benefits can be a useful way to reward employees, relatively few benefits are tax-efficient for both employer and employee. A notable exception is the provision of electric cars where grants and incentives can result in substantial savings.

For tax purposes, an electric vehicle is defined as ‘a vehicle that derives its motive power exclusively from an electric motor’. This does not include hybrid vehicles.

In 2008, Government set a target of 10 ten percent of the national car fleet — around 230,000 cars — being electric by 2020. However, up to now, the take up has been slow. Currently, there are fewer than 4,000 electric cars on Irish roads.

To stimulate demand, various grants and incentives are available. These include:

  • An electric vehicle purchase grant of up to €5,000 (or up to €3800 for commercial vehicles) available from the Sustainable Energy Authority of Ireland (SEAI). This grant applies to qualifying vehicles purchased from an approved dealer. The grant level depends on the list price of the vehicle. Grants are subject to a 3-year ceiling of €200,000.

  • Electric vehicles also receive VRT relief. Passenger cars or commercial vehicles (VRT categories A and B) that are powered only by an electric motor and registered before 31 December 2021 are eligible for relief from VRT up to a maximum amount of €5,000. VRT relief for Battery Electric Vehicles (BEVs) is in place until the end of 2021 and for Plugin Hybrid Electric Vehicles (PHEVs) until end of 2018. Electric motorcycles are exempt from VRT until 31 December 2021.

  • An accelerated capital allowance scheme permits write off of capital investment on a qualifying electric company car within one year. In effect, this means that employers who buy an electric vehicle can front-load the depreciation thereby achieving substantial savings on their tax bill.

  • Employers can offer an electric car as a benefit to employees without attracting Employer PRSI.

  • Zero Benefit-in-Kind (BIK) on driving an electric company car where an employer provides an employee or director with an electric car or van during the period 1 January 2018 to 31 December 2018. This means that no taxable benefit arises for the employee or director.

  • Zero percent BIK for employees charging the car at their workplace. In effect, this means an employee benefits from free fuel through company owned charge points.

  • A €600 grant is available from the SEAI for homeowners with electric cars to help cover the purchase and installation of home charger systems.

As these grants and incentives potentially provide significant benefits, they should be carefully considered, particularly where employees and directors have low annual mileage. To find out more about how your business could benefit, please contact a member of our team.