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Covid-19 - the end of the company car or the rise of the electric car?

Is Covid-19 going to lead to the end of company car schemes and the associated tax revenues that HMRC enjoy?  Or, will it lead to a radical shift towards even more company cars being electric so that the stock is built up for regular consumers to access the electrical vehicle market?

Covid-19 has led to hundreds of thousands of people working from home.  Many people are realising the benefit of working from home having previously commuted to their place of work in terms of work life balance and reduced cost.  And, whilst this may not continue forever (some will), many are likely to return on a blended basis (splitting time between the ‘home office’ and the usual physical office) as employers seek to reduce property costs.  Where does that leave the company car and its associated tax revenues?

For many years the company car has been the target of a steady supply of tax revenue as well as the associated fuel duties, vehicle excise duties & insurance premium taxes.  However, as working habits change so will the demand and need for company cars.  Two or three car families are likely to realise that they don’t need large 4x4 vehicles and downsize or even reduce the number of cars in their family as they seek to reduce their environmental footprint.

One solution could see the Government continue to support electric vehicles which from April 2020 enjoy zero tax on Benefit in Kind for 20/21 tax year.  It is expected that UK cities will follow London’s lead and introduce congestion charges and an option for the Government could be to make electric cars exempt from this charge.  This would encourage company car workers who are taking a blended approach to work in the future to go electric to reduce their current company car tax bill and avoid future congestion charges.  The government could even go one step further and cut all taxes associated with electric cars such as insurance premium tax.

 So, whilst Covid-19 could see less company cars, it could see more electric company cars that support the Governments long term environmental ambitions.  It is only through the stock of company cars being increasingly electric will electric vehicles increase in number (currently less than xk out of x million vehicles) and they become mainstream.  If you don’t have an electric company car, now is the time to certainly think about it so that you can reduce your existing tax bill, potential future tax bill and do your bit for the environment!

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