Designing an electric vehicle company car policy
The Association of Fleet Professional’s EV, Alternative Fuels and Low Carbon Committee shares key considerations when reviewing a company car policy for electric vehicles and some best practice suggestions
The Association of Fleet Professionals (AFP) has recently launched a Best Practice Fleet Policy Guide for EVs, which shares a number of key considerations that are needed when introducing pure electric and plug-in hybrids onto a company car fleet. This article shares some of the key points.
Fully electric vehicles and PHEVs are different from traditionally fuelled cars in many respects. This can create some negatives where additional cost and management time may be required, however if implemented correctly the introduction of plug- in vehicles should provide both employee and employer with significant tax savings, improve the environment, and generate other cost savings such as fuel and the avoidance of penalties in emission-based charging zones.
Plug-in vehicles should be “fit for purpose” for the driver and the fleet requirements. This is both vehicle type and specification, as well as correct for the type of drive cycles the car will be used for, i.e. the typical daily mileage should be within the electric range of an EV to ensure there is only an occasional need to charge during the day.
For PHEVs, the majority of the daily mileage should be achieved in EV mode with the Internal Combustion Engine (ICE) only being used for occasional longer journeys. In general, they are not a good vehicle choice and can be very expensive to run, far more than an ICE vehicle, if running on the petrol engine more than the electric powertrain. Of course, if used correctly they can be a good stepping stone into pure EVs.
For employees running vehicles with high mileages per annum, be careful. Although it is very much possible to run an EV on mileages over 20K per annum, check the daily mileages and work with the employee to ensure the vehicle can be run effectively.
It is critically important to review the company car selection process. Plug-in vehicles are typically higher cost than Internal Combustion Engine (ICE) vehicles and will therefore normally attract higher rental rates. However, if you factor in company NI, fuel costs, SMR etc over the life of the vehicle they can be significantly cheaper than a traditional ICE. As such, we would strongly recommend using Whole Life Cost (WLC) as the selection methodology for any mixed fuel fleet policy.
Using a Whole Life Cost (WLC) policy is important, but we would also recommend having flexibility in the company car policy. Where there are limited plug-in vehicles on the market and many of them are high cost (compared with the equivalent ICE) even under a WLC policy some employees may not be able to obtain an EV in their grade. We therefore suggest looking at allowing employees to trade up based on WLC - this will ensure the company is not exposed to higher costs and if drivers make a private contribution to trade up to a plug-in vehicle it could dramatically reduce their Benefit in Kind Tax and result in a much more cost effective option for them.
Allow cash employees back into the company car scheme and review launching salary sacrifice schemes for pure EVs only.
Any employee taking a plug-in vehicle should have a dedicated charger at their home if they have the potential to fit one in. This will allow maximum use of electric driving for a PHEV and ensure range anxiety is minimised for a pure EV. Dedicated home chargers are both safe, convenient to use, and will charge a car much faster than by a standard three pin socket (which we would not recommend). Please always refer to the vehicle manufacturer’s recommendations regarding using a three-pin socket.
Do not exclude employees that cannot fit a home charger at their property (live with no driveway, rented accommodation and landlord will not allow fitment etc). Providing the employee is dedicated to make it work, work with them to ensure the company is comfortable that they can charge the vehicle effectively. In these examples, issue a declaration form for the employee to sign to take responsibility for charging the vehicle effectively at their cost.
The company must decide whether they are to provide a charge point for the employee at home, or whether the employee will be expected to pay for it. Both methods are common although at the moment (and HMRC have changed this before so we recommend checking regularly with HMRC) benefit in kind tax will be chargeable for the employee if the company pays for the charge unit. You also need to consider what happens if the employee moves home.
As further options, it is also possible to include the charge point costs within the lease costs or you could allow the company to pay for the charge point and then deduct the cost over a 6-12 month period, directly from the employee’s salary.
It is important to consider your fuel policy and mileage reimbursement systems when introducing plug-in vehicles. It can be quite complex to deal with multiple fuel types (i.e. for PHEVs petrol/ diesel and electricity) and also to identify the amount of electricity used if employees are recharging their vehicles at home, work and on the public charging networks, where for the latter costs can vary from free, to charged by the incident or by the amount of electricity drawn. It may be worth considering using HMRC’s AFR and AER rates for reclaiming business mileage, which provide a simple and straightforward reimbursement solution.
The Association of Fleet Professional’s electric vehicle guides cover examples of setting out an EV policy; hints and tips for assessing the suitability of electric vehicles, example sections for the company car policy; and employee communications with regards to electric vehicles.