They sound perfect.  A zero emissions electric vehicle for knocking about town with a petrol or diesel engine for longer journeys.  Ticks in the box for green credentials, low tax liability and practicality.  So are hybrids a tax dodge?

But is that the reality?

Cars like the brilliant Mitsubishi Outlander PHEV are flying off the production lines for the above reasons and make great sense as company cars due to the low benefit in kind tax they attract. With CO2 emissions below 50g/km it sits in the lowest possible BIK bracket along with fully electric, range limited, vehicles and a company car driver pays tax on just 7% of the value of the car. (Please see my previous article on what that 7% will change to though in the coming years).

The emissions test is perfect for hybrids as the vehicle is tested from cold.  Fully charged EVs are just as efficient from cold unlike petrol or diesel which are far less economical and more polluting than when warmed up.  The test only covers a few miles and so the electric range is more than enough to complete it without resorting to combustion which means it passes with a very low result which in turn means low tax and good economy.

But what happens in the real world?  

Utilising an electric vehicle properly means a change in routine – typically charging a car at night rather than filling up when low.  The driver has no choice but to make the change in habit otherwise he or she will be stranded.  With a hybrid there’s no forcing this change as the driver can continue to fill up.  And that creates an issue as when run on fossil fuels these cars are not that economical.  A big SUV like the Outlander would usually be diesel but the PHEV has a less economical petrol engine and has to lug the extra weight of the electric motor and battery around meaning higher running costs if it’s not used as it was designed ie daily charging and maximum use of the 30+ mile electric range).

So if you are an employer you need to think about making sure the employee doesn’t get all the benefits of low BIK whilst passing a high cost of fuel to your company.  It’s not that the employee will deliberately do this but is the natural result of the human reticence to change habits.  One solution could be to agree a business mileage rate that’s reasonable based on maximising the electric capabilities of the vehicle rather than simply paying the business pro-rata portion of the total fuel bill.  

Also, check before ordering the vehicle that the employee has suitable facilities at home for charging including installation of a fast charging point (part funded by government grant). If it’s on street parking only then a plug in of any sort may be unsuitable.

If you are a small business owner or private user then the principle remains the same; to make the most of the vehicles, changing your routine to benefit from the electric range is crucial.

So is a hybrid a tax dodge?  

Not deliberately but if measures are not in place to ensure that the driver uses it as intended then overall costs can be high with the driver remaining oblivious and the company paying over the odds.  Used properly though this class of vehicle could well be the best choice of company car on the market right now.

I’d be interested to hear from any hybrid drivers or businesses running them to find out what they are doing to ensure these cars work for everyone.

If you’d like to know more about how leasing works and how it could work for you, please get in touch.  If you think others would be interested in this post, please share it.

Matt Spivey

Vehicle Leasing Neva Consultants
Left the corporate world in 2013 after ten years at Vodafone and now specialising in car and van leasing with Neva Consultants.Serial networker and member of BNI Wakefield Wealthbuilders, 4Networking and The TradesHub Academy South Yorkshire.

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