Electric cars and benefit in kind
THE follow-up to Budget Day is the publication of the law — the Finance Bill — which gives effect to the Budget Day changes. Over the course of this process, additional tax measures over and above what was announced on Budget Day often emerge. These are rarely in the taxpayers’ favour.
It is a measure of the preoccupation with tracker mortgages that a significant tax exemption could be announced by the minister last week, yet receive hardly any attention. The announcement has to do with electric cars.
If an employer provides an employee with the use of a car, that’s treated as a taxable “benefit in kind” by Revenue. Each year up to 30% of the value of the car is treated as if it was additional salary, and the employee is taxed accordingly.
On Budget Day, Finance Minister Paschal Donohoe announced a one-year exemption from benefit in kind on electric cars.
In reality, a one year exemption wouldn’t have been much use as an incentive, but his announcement last Tuesday that the zero rate of benefit in kind tax on electric cars would remain for a minimum of three to five years is surely a game changer! Coupled with another budget announcement that the recharging of cars on employer premises would also be tax-exempt, this holds out the prospect of completely tax-free motoring, at least from the employee perspective.
Traditionally motoring has been a favourite target when it comes to raising money for the exchequer. Vehicle registration tax, excise duties on road fuels, high rates of Vat, and road taxes all meant that whenever a tax break on motoring was presented in the past, it is avidly availed of.
Lower road taxes on less CO2-emitting engines changed the make-up of the national fleet, and a low rate of VRT at one time meant that twin cabs seemed omnipresent on our roads.
Not all workers are in the fortunate position of being offered the use of an electric car as part of their package, but last week’s announcement will undoubtedly make it more common.