Andrew Streeter

Thank you Clive and that is the only logical answer to me. However, Claudia is right in stating that HMRC advise that if you have the option of a cash allowance or a company vehicle, you will pay the higher tax liability regardless of which you choose (unless the company car you select emits less than 75g/km of CO2). I am really hoping HMRC provide that clear, definitive answer here rather than referring me to guidance notices which are anything but clear to a layperson.

I have attempted to digest EIM42755. Am I correct in understanding that because electric vehicles emit less than 75g/km of CO2, I will pay the BIK relevant to that EV and not the tax liability of the higher monetary value (the £5,250 car allowance I have previously utilised)?

It is hard not be confused and the word 'may' below certainly does not help. Below is an extract from a guide produced by a fleet management company: 4. Other Considerations: If you have a choice between a car allowance and a company car, you'll be taxed on the higher value of the two benefits. However, if the vehicle you drive emits less than 75g/km of CO2, you may not be taxed on the higher value benefit.

I should add, when my colleagues change their company cars, the BIK immediately changes to that of the new vehicle. Why would my tax liability not follow the same pattern?

Apologies for remaining unsure, so I would continue to pay tax on the higher monetary value even though I will no longer be receiving it? Why is that? Surely that only serves to de-incentivise switch to electric vehicles.

I currently receive a car allowance of £5250 per anum which is processed via PAYE. I was thinking of switching to a company car, specifically an EV with a benefit in kind of about £40 pcm. My employer advises that I will be required to continue paying the tax on the higher monetary value of £5250 not the £40 BIK regardless of the switch, is that correct?