No BIK tax on electric cars

  • Five-year amnesty from company car tax for electric vehicles
  • Chancellor's announcement welcomed by fleets
  • Mainstream manufacturers to begin offering electric cars in 2010

Company car drivers could take advantage of a five-year exemption from BIK tax on their vehicle by choosing electric in 2010.

The announcement came in the pre-budget report and will apply to all electric cars and vans from April 2010.

Currently, drivers who are provided with an electric company car face a BIK tax bill of nine per cent - the lowest band possible.

But according to tax experts, the new rule will save a basic rate taxpayer driving a company-provided electric car will save £264 a year, while the employer will save about £200 a year in National Insurance contributions.

Mainstream manufacturers are planning to introduce electric vehicles during 2010, with Mitsubishi, Peugeot and Citroen all offering their own versions of the Mitsubishi i-MiEV electric car by the end of the year.

The Electric Car Coproration already offers an electric version of the Citroen C1, the EV'ie, in the UK, priced at £18,500, more than double the cost of a standard petrol C1.

Gary Hull, company car tax expert at Pricewaterhouse Coopers, said: 'This may encourage employers to consider the provision of electricity-propelled vehicles for low-mileage drivers and also as pool cars for local business journeys.

'There will be no need to keep detailed business mileage records to demonstrate that only limited private use has been undertaken.'

Earlier this year, the Government also announced a subsidy of up to £5000 for electric vehicles from 2011, which is likely to encourage take-up by fleet operators even further.

Drivers of electric vans would also be subject to the same five-year BIK tax holiday while van fleet operators will also benefit from a 100 per cent first year writing down allowance for electric vans.