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Plug-In Hybrid Electric Vehicle Misuse for Company Cars

12 May, 2017.

Julie Larkman

We all like a nice car. We all like a nice bargain. When it comes to company cars however, the choice is usually limited to the car that you are allowed to have under a company car scheme. This is more usual for larger businesses that run a fair few company cars but it may also apply to smaller businesses.

As you know, the calculation of company car tax is relatively straight forward. You take the taxable list price for the vehicle and multiple by the appropriate percentage that is derived by the stated Co2. So, in order to work out what tax you will pay you need:

  • The taxable value of the car - this value is shown next to the cars on CarLease247 when you select the car tab in the results page.
  • Co2 emissions - this value is shown next to the cars on CarLease247
  • Appropriate % - this value is calculated with reference to the Co2 emissions of the car and the fuel type
  • To calculate the company car tax that you would pay, simply multiply the appropriate % by the taxable value of the vehicle and by your current tax rate (20% or 40% for example).

So for a car with a taxable value £20,000 and an appropriate % of 10%. If your tax rate is 20%, the tax is £20,000 x 10% x 20% = £400 per year, or just over £33 per month.

Now to PHEVs and we are going to look at a great car and one that is racing up the registration numbers in the UK - The Mitsubishi Outlander PHEV.These start with a taxable list price (list price, P11d value) of £34,249 - quite a bit of motor. Now the Co2 on this vehicle (the 2.0 PHEV GX3h 5dr Auto) is a puny 42g/km. Ok, now for the maths. The appropriate % for 42g/km for the 2016 / 2017 tax year is 7%. The benefit in kind (BIK) is therefore £34,249 x 7% = £2,397.43.

The company car tax would be £480 per annum for a 20% PAYE tax payer and £959 for a 40% PAYE tax payer. That is £40 and £80 per month respectively.Sounds like a good deal for a company car driver, particularly that your maintenance and insurance is not subject to BIK tax rules.Now here is the BUT. The Co2 relates to the vehicle being tested in an environment where it is used partly on the electric motors and partly on the petrol engine. What would be the case if the vehicle was driven purely on the petrol engine?

 Well, what you have is a big petrol SUV that is dragging around a load of electronics that is never actually used. This matters not for the company car driver as the rules around BIK tax are what they are. There is no penalty for the driver not using the electric motors. Hmmm.....Let's have a look at a similar priced SUV and the Outlander side-by-side:

Now, lets take a look at the tax:

So, for the X3, you would be looking at a company car tax bill FIVE TIMES that of the Outlander. We appreciate that there are many more variables that you would need to take into consideration when comparing the two from a company car perspective, but from a pure tax point of view, the message is clear.

So, from a pure financial perspective the Outlander makes more sense IF the car is being used appropriately. However, if it is being used solely on the petrol motor then things get a bit expensive for both the driver (doing their personal mileage) and the company (paying for business mileage). We cannot find any data on what a Outlander PHEV will do from an mpg perspective on the petrol motor alone, but given that Autoexpress has stated that the combined (with an obsession to maximise electric range) is around 54mpg, we can only speculate what the petrol only mpg is. Sub 30 we recon based on the 2.0L engine and the weight of the vehicle (and we are being kind).

In conclusion, we beleive that this disconnect needs to be addressed and real world adjusted emmissions are used. The Department for the Environment, Food and Rural Affiars (DEFRA) already publich guidelines on how to convert stated Co2s and MPGs (see an example here) but this is more for the purpose of carbon emissions measurement etc and does not relate to compant car tax. The simple fact of the matter is that if a company car driver wants to be canny and chose a vehicle by Co2 alone (and is not subject to a car policy that prevents this), then the consequences are that they could be paying through the nose for fuel if they do not use the electric motors. Let's not even go down the road of how much it is really costing their company ??

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Posted on 12th May 2017 at 1:35 PM

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