Benefit in kind support for electric cars to be extended

Initiative in budget of one-year trial to be available for three to five years

A Bank of American Merrill Lynch survey suggests that electric vehicles will account for 12%  of global car sales by 2025, 34%  by 2030, and 90%  by 2050. Photograph: Getty Images
A Bank of American Merrill Lynch survey suggests that electric vehicles will account for 12% of global car sales by 2025, 34% by 2030, and 90% by 2050. Photograph: Getty Images

Minister for Finance Paschal Donohoe has widened the scope of a special zero tax rating on electric vehicles under benefit in kind (BIK) rules.

The 0 per cent BIK incentive announced in the budget as a one-year trial will now be available for a minimum of three to five years, the Minister has confirmed.

The move has been described as a “game changer” by the motoring industry. The Society of the Motor Industry in Ireland (SIMI) predicted it would prompt much stronger uptake of electric vehicles (EVs) in the Irish market.

Mr Donohoe has indicated that change is in the context of supporting moves by the State to reduce emissions of carbon-dioxide.

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It will make electric vehicles a more attractive option for motorists, with possible savings of up to €10,000 a year for low-mileage company car users. Car leasing firms, which usually buy vehicles in a three-year cycle, can now can plan depreciation in a more viable way over a number of years.

“While this relief is provided for an initial period of one year, it is my intention that the zero rate will remain in place for a period of time, a minimum of three to five years, sufficient to incentivise the uptake of electric vehicles,” said Mr Donohoe.

He confirmed a comprehensive review of benefit in kind on vehicles would take place in 2018. It is expected that review will “set out proposals for longer term BIK relief for EVs as well as informing decisions for Budget 2019 more broadly”.

Game changer

In response to the revised measure, SIMI director general Alan Nolan said: “It is a great move and we welcome it. This is a game changer. It allows the industry go out and sell this as an option to companies.”

Limiting the measure to one year made no sense, he said, as no company was going to buy a car for a year. Without clarity for the medium term it also made no sense for individuals given the higher upfront cost of electric vehicles.

He said for motorists the incentive would be significant, especially those living in cities and doing small mileages. The benefit would also be evident in replacing older diesel and petrol cars. The challenge to the industry was to ensure enough electric vehicles would be available in the Irish market, Mr Nolan told The Irish Times.

He said about 1,000 EVs including imports would be purchased this year. There was now an opportunity to double that next year and then to achieve even stronger sales.

Tax relief

The lower benefit in kind rate comes on top of the current vehicle registration tax (VRT) tax relief to a maximum of €5,000 and the SEAI grant of up to €5,000 already in place.

While the latest change was a very significant step, SIMI said it always believed a series of measures were needed to “normalise” EV use.

The change on benefit in kind rules comes as a Bank of American Merrill Lynch survey suggests electric vehicles will account for 12 per cent of global car sales by 2025, 34 per cent by 2030 and 90 per cent by 2050.

Kevin O'Sullivan

Kevin O'Sullivan

Kevin O'Sullivan is Environment and Science Editor and former editor of The Irish Times