Tanya Sinclair, Policy Director UK & Ireland at ChargePoint
As the UK emerged from lockdown last summer, the Chancellor intended to get individuals out spending to aid the economic recovery, through initiatives such as the Eat Out to Help Out scheme. This year, as we emerge from the third (and hopefully final) lockdown, Budget 2021 has been designed to aid economic recovery by rewarding businesses of all sizes for increasing their spending activity.
The Government revealed plans to invest £12bn in financing the UK’s green revolution and commitment to green growth, targeting both public and private green infrastructure. Certain initiatives have been put in place to support businesses that are rapidly scaling and investing in the UK’s green transition.
The flagship announcement in the Budget was a new tax break called the super-deduction, which came into force on 6 April. It is an innovative tax instrument never before utilised in the UK. It means that eligible businesses could get a 130% write-down on taxable profits against qualifying plant and machinery equipment before 31 March 2023. This includes new electric vehicle (EV) charging equipment, helping to ensure that spending is not just aiding economic recovery, but a green economic recovery.
What does the 2021 Budget mean for EVs?
This means that for every pound spent, businesses’ taxes on this equipment are cut by up to 25p in the pound. And because purchases of new EV charging equipment qualifies for this tax benefit, if an eligible business spent £100k on charging solutions, it would then be able to deduct 130% of that cost (£130k) when calculating its taxable profits. These businesses can minimise their tax exposure during this period of COVID recovery while they are investing in the transition to EVs.
Although this policy wasn’t designed specifically with EV charging infrastructure in mind, the government has named it as one of the key areas where businesses will be able to benefit.
The tax break offered by the super-deduction isn’t without a catch – it’s a write-down against corporation tax so any business able to claim it will have to be profit-making. I am by no means a tax professional, so do speak to your tax adviser to understand your options fully and to see if this is an applicable opportunity for your business.
How the Budget will impact your business
This tax benefit comes at the perfect time if you are a business with any transportation element to it, whether this is a single company car or a whole fleet of delivery vehicles. In November 2020, only a few months before the Budget, the government announced it would end the sale of petrol and diesel cars and vans by 2030. This announcement gave the car industry, the charging industry and the energy industry a clear target to meet in terms of providing enough vehicles, chargers and clean energy to support this unprecedented shift.
In years past, some EVs would have waiting lists of over 12 months. But with the 2030 announcement the UK is now perceived to be a key EV market for car and van manufacturers, so they are making sure that they increase supply – introducing new models and producing and importing enough vehicles to meet the increasing demand. And charging companies, already starting to see this huge increase in EVs on the roads, are rapidly increasing the rate at which they install chargers to serve this population of vehicles. The government, having set the pace of change with the 2030 announcement, have also committed to introducing a suite of new regulations to ensure that all chargers are reliable, smart and easy to use.
For those businesses who have been thinking about buying EV charging equipment but have been waiting for the right time, now is that time. Not only because the EV market is picking up, but because it now makes more sense than ever before on the balance sheet. This becomes a more prescient point with the planned increase from 19% to 25% in corporation tax which comes into force after the super-deduction ends.
If you are advised that your business can benefit from the super-deduction, then now is the time to invest in EV charging infrastructure, as it has never been easier or more financially prudent to do so.
Companies such as my own, ChargePoint, offer a wide range of smart solutions which offer users an open, networked charging solution that is easy to scale with your business. These software-driven products can help drive down costs further by reducing power requirements for your total fleet and can come with installation, maintenance programs and a whole host of features that make fueling your transportation needs easier than ever.
By taking care of your business’s charging provision today, you can ensure your fleet operations are future-proof, and you will benefit from a tax break whilst doing so.
