An Electric Vehicle salary sacrifice scheme includes a salary sacrifice deduction that can cover costs such as the lease, maintenance, servicing and insurance. The lease payments are deducted before tax and Class 1 National Insurance which results in the employee and employer having reduced payroll liabilities.
However, the company car is still a taxable benefit. It is subject to tax and Class 1A NIC. The salary sacrifice contributions towards the car, cannot be reported as payments ‘made good’ as they have not been deducted after tax has been calculated on the employee’s gross pay.
To set up an electric vehicle in PayFit, there are two steps, one is to set up the company car as a benefit, and the other is to set up the salary sacrifice deduction for the lease/rental payments.
Set up the electric vehicle as a company car benefit
You'll need to set up the electric vehicle as a benefit with an engine size and CO2 emissions of zero, and fuel type A. It's important that you follow the instructions below so the correct rates are used for the electric vehicle;
Tip: If this is the first company car entered in PayFit, you'll need to enable the Company cars & fuel section. To do this;
From the left, choose Company settings, then Benefit settings.
Under the General settings section, click Set benefits preferences.
Answer each of the questions, then click Save.
From the left, choose Company settings, then Benefit settings.
Under the General settings section, click Activate benefits schemes.
Enable Company cars & fuel, then click Save.
Select Benefits in kind, then Company cars & fuel.
Use the Search employee box to find the employee you want to add the benefit to.
Next to the relevant employee, click See all then Add new company car & fuel.
Select Employer next to who owns the car.
Select any special circumstances that apply & that the car is used for Private journeys.
Select whether the employee or employer pays for fuel.
Enter the Make and model.
Select the Car fuel or power type option as A - All other cars (incl. electric vehicles).
Select that the car is an electric vehicle.
Enter the date car was first registered.
Enter the car costs and the dates the car is available to the employee.
Click Save.
For further information on setting up a company car, please refer to the Company Cars and Fuel Benefits Help Centre article.
Set up the salary sacrifice deduction
To do this;
From the employee's record, click the Pay items tab.
Under the Additional deductions section, click Add a new deduction.
From the Deduction type drop-down, choose Contractual deduction.
From the Type of contractual deduction drop-down, choose Gross deduction.
In the Name field, enter a description for the salary sacrifice deduction, i.e. Electric Vehicle.
From the Date field, choose the date that the deductions will start.
In the Monthly amount field, enter the monthly lease/rental payment.
From the Apply this deduction... drop-down, choose Every month.
In the End date field, select the date of the final deduction amount.
Click Save contractual deduction.
The deduction should appear as a negative value under the Payments section of the employee's payslip as the value is deducted directly from the employee's gross. In turn, this reduces the tax and national insurance due.
Important notes for salary sacrifice schemes
Salary sacrifice can't be taken from an employee in receipt of the National Minimum/Living Wage.
Salary sacrifice reduces an employee's income NI'able income. The NI'able income is used to establish eligibility, and the weekly rate for statutory sick or parental pay.
Additionally, salary sacrifice cannot be deducted from statutory pay including:
Statutory sick pay
Statutory maternity pay
Statutory paternity pay
Statutory shared parental pay
Statutory adoption pay
Statutory bereavement pay