Are we liable for output VAT in connection with the supply of a salary sacrifice company car?
What is Benefit in Kind tax for electric cars?
Are we liable for output VAT in connection with the supply of a salary sacrifice company car?
No, as far as we understand, the current HMRC guidance is that output VAT does not apply to company cars provided for employees. See Section 2 (Intro to The Electric Car Scheme) for more information.Disclaimer:The Electric Car Scheme is not authorised to provide tax, legal, HR or accounting advice. Content or information provided or made available by The Electric Car Scheme is for general information only and is not tax, legal, HR or accounting advice on which reliance can or should be placed.
Can we payroll employee taxable benefits? Do I need to do anything in relation to BIK if we payroll benefits?
If the company would prefer to payroll employees’ taxable benefits, you can continue to do this if you are set up to do so. You do not need to do anything in relation to BIK unless your company payrolls benefits.If the company would like to payroll employee taxable benefits and avoid P46 (Car) forms in the future, you’ll need to register with HMRC before the beginning of the tax year so that payrolling can apply from the next tax year. Prior to February 2021, HMRC accepted that a company could tax employee benefits through payroll on an informal basis without a P46 (Car) form - however, this is no longer the case.
What is Benefit in Kind tax for electric cars?
According to HMRC, employees receive a benefit-in-kind (“BIK”) when they obtain a car through a salary sacrifice scheme. HMRC imposes an additional tax on the BIK received by that employee, and the BIK rate is currently set at 2% of the P11D value of the car until the ‘24/’25 tax year, and will then increase by 1% annually until the ‘27/’28 tax year (per the annual Finance Act).Any tax estimates provided by The Electric Car Scheme for after 5 April 2028 are estimates only.