Jake Harrison of helloEV, explains the issues of current company car schemes as well as grey fleets and why electric vehicles are a preferable alternative.
The world is warming up!
Fossil fuels are said to be the culprit and young people, led by Greta Thunberg, are protesting at older generations of leaders for the environmental fallout!
The good news is, businesses have a key role in implementing green solutions and this can also be commercially beneficial. For example, purchasing an electric vehicle now makes good sense if you're operating a company car, or a fleet of them.
In this post we'll explore how growing businesses with company car schemes or grey fleet policies can operate Electric Vehicles and the financial advantages this can bring. However, before we get into the details, it's important to understand some basics about employees' business travel.
How does a company car scheme work?
A car provided by an organisation to an employee for business and/or private use is classified as a company car. It is also considered a benefit from the business. This is known as ‘Benefit-in-Kind’ and means the benefit is taxable.
What is a Grey Fleet?
When an employee’s private vehicle is used for business travel it becomes part of the "grey fleet". This can also include a privately rented vehicle or one purchased via an employee ownership scheme. Grey fleet means such vehicles fall under the responsibility of the employer.
Why your company car scheme should include Electric Vehicles (EVs)
Often emloyees get to choose from a list of cars provided by their employer, it's important for several reasons that your list includes EVs:
It reduces tailpipe CO2 emissions compared to petrol/diesel options.
It helps introduce more people to EVs and the related infrastructure to normalise the process of charging while at home, or work, or out and about. This helps society as a whole prepare for the upcoming change.
It prepares your business and personnel for the Clean Air Zones that are being introduced as well as the higher penalties for parking with a conventional car e.g. in London which are avoided if travelling in an EV.
Benefit-in-Kind (BiK) taxation from 2020 to 2023 is very low so this enables employees to have a higher take home pay while driving a more environmentally sustainable vehicle.
Point four can be complicated but it's important. Let’s delve into it a bit further. BiK taxation is worked out by multiplying the vehicles value, including VAT and options (called the P11D value), by the BiK bracket and the employee’s income bracket. The government announced recently for 2020-2021 the BiK for fully electric vehicles will be 0% rising to 1% in 2021-2022 and just 2% in 2022-2023.
That represents a reduction by 14% from the levels today! It will apply retroactively to electric company cars already registered before the 6 April 2020 introduction date for the new rates. To qualify the car must be a 100% battery electric vehicle or a plug-in hybrid capable of doing 130 miles using its battery.
Moreover, ensuring Electric Vehicles in your company car offering will help keep you green, and up to date with corporate social responsibility initiatives. That's also good PR and can help with attracting and retaining good employees.
The challenges of operating a Grey Fleet
The British Vehicle Rental and Leasing Association’s (BVRLA) ‘Getting to Grips With Grey Fleet’ report found that employees travel 12 billion miles a year in 14 million grey fleet vehicles! This is said to cost employers around £5.5 billion.
Grey fleets can often result in higher costs than expected as well as providing business risks in terms of insurance. You also have duty of care implications. The vehicles used by grey fleet drivers may not be as new or well-maintained as company vehicles.
Currently, HMRC rates for business miles stand at 45p per mile for the first 10,000 miles by an employee. This is extremely high and can add up to high sums the more employees you have and the more trips that are required.
Moreover, it can be difficult to ensure the drivers in your grey fleet are safe drivers with clean driving licences and the correct insurance, whereby they're insured for both business and personal use.
If the employee ends up causing an accident, for whatever reason driving for business while on personal insurance, there is the potential that your business could be involved in a corporate manslaughter charge! This should not be taken lightly.
The reduced risks of EVs owned by your organisation are clear. Furthermore, like-for-like charging of company EVs will in all probability be cheaper than the HMRC 45p per mile basis across a 5-year lease.
A pooled car system solution
Even more savings can be found if a shared EV pool car system is introduced. This works whereby employees can book and access the car when they need it through a smart phone app. They can even book it in their personal time after work or at weekends. That creates another revenue stream and a higher utilisation of the vehicle.
This can be an ideal solution. It could be quite likely that your employees aren't doing enough mileage to warrant their own vehicle. A rigorous system that helps ensure car safety and maintenance while checking employees are fit to drive can be safer, more cost effective, and therefore better for the business in the long-run.
Helping you go electric
If you're keen to explore solutions to turn your shared EV pool cars into ones that can be booked through a keyless solution, click here.
At helloEV, we can carry out an analysis of your fleet to understand the benefits of going electric or introducing shared EVs. This includes information about Government grants, BiK taxation and the benefits of moving to EVs.
We also provide test drives of an EV for you and your fleet drivers (silence, speed and ease) to help increase awareness.
The content of this post was published on 01/10/2019.
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