HMRC has confirmed that the P11D price for EVs will include the price of the battery even if the battery is leased rather than purchased outright.
While the 2010 Budget announced a five year tax break for battery electric vehicles, from 2015, battery electric vehicles will begin paying company car tax based on a BIK rate of 5%. An EV’s P11D price will therefore become an important consideration from April 2015.
EV manufacturers that sell electric models with separate battery leasing contracts will therefore have to quantify a value for the battery, plus VAT, and add this to the up-front price of the vehicle to calculate the P11D value. EVs which are sold with batteries included will have their P11D calculated in the normal way as for conventional vehicles.
For example, under the new rules a company car driver choosing a Renault Zoe (one of the first models to be sold with a battery lease) would pay company car tax on the full value of the car (before the government’s plug-in car grant is deducted) including the value of the batteries including VAT.
Taken together, this means that the P11D value of a Renault Zoe Dynamique Zen would be £27,435 based on current prices. This is compared to an effective up-front on-the-road price of £15,135.
HMRC’s new rules would also affect the employers’ National Insurance contributions, with the Class 1A National Insurance Contribution being worth 13.8% of the value of the car including the battery value.
The real issue here is not that the battery price forms part of the P11D price, its that HMRC has decided to remove the zero BIK rating for battery electric cars from 2015, at a time when the market will still be fragile. If the Government wants to see significant numbers of EVs on UK roads in years to come, it needs to reinstate 0% BIK rate for EVs until at least 2020 to give company car and fleet EV sales a chance to grow beyond the ultra-early adopters.