As the take up on Electric Cars, both by individuals and company car drivers increases, the rules regarding claiming for the usage of electricity needs to be examined.
The initial investment in acquiring an electric car is usually higher than a petrol or diesel alternative however, these vehicles are generally cheaper to run. The mileage claim process for an electric car will be also be different.
The following guidance looks at the rules on claiming mileage for an electric car, together with the current electric car mileage rates, plus how to claim for charging a company car at home. We also consider hybrid cars, as well as privately-owned vehicles used by employees for business journeys.
Electric Car Mileage Claims – Company Owned Vehicles
Advisory fuel rates (AFRs) are issued quarterly by HMRC. They are recommended rates issued by HMRC and provide specific rates that employees can use to claim back from their employer the cost of business journeys for company cars.
For Electric Cars, HMRC issues a separate and much lower flat rate for fully electric vehicles. From 1 March 2023, the rate for fully electric cars is currently 9 pence per mile.
This rate changes on a quarterly basis and the current rate can be found on the HMRC website – www.gov.uk/guidance/advisoret-fuel-rates
The Advisory Electricity Rate (AER) is calculated similarly to an AFR, based on energy-efficiency data and the average cost of a unit of electricity at home.
AFR and AER rates can be used when an employer reimburses an employee for business travel in their company cars.
Hybrid cars still don’t have their own AERs/AFRs. All hybrids, including plug-ins, are reimbursed at the same rates as a petrol or diesel car, based on their engine size
Image by Steve Buissinne from Pixabay
Electric Car Mileage Claims – Privately Owned Vehicles
Essentially, where the employee uses their own car the mileage rate for a fully electric car is the same as for a petrol or diesel car. This is set at 45 pence per mile for the first 10,000 miles, then 25 pence per mile for any additional mileage.
The electric vehicle owner-driver can also claim 5 pence per mile for each passenger they drive on the same business trip.
Tax Implications
Anything paid above the ‘approved amounts’ for AFR & AER, must be reported by the employer to HMRC on form P11D. The additional amount over the approved amount must also be added to the employee’s pay, with tax deducted and paid as normal.
An employee may receive a taxable benefit in connection with their electric car if their employer either pays for a vehicle charging point to be installed at the employee’s home, provides a charge card to allow access to commercial or local authority vehicle-charging points or pays to lease a battery for the employee’s car.
Workplace electric vehicle charging
A tax exemption applies to remove the charge that might potentially arise where an individual charges the battery of a vehicle that is used by the employee.
Private vehicles
The exemption means that an employee is able to charge their own car using a workplace charging free of any benefit in kind tax charge. There is no requirement that the electricity provided is used for business journeys; the exemption applies regardless of whether the charge powers business or private journeys.
The exemption only applies if the following conditions are met:
• the charging facility is provided at or near the employee’s place of work;
• charging must be available to all the employees generally or those at the particular workplace should they wish to use the facilities; and
• the vehicle which is charged is one in which the employee is the driver or a passenger.
Company vehicles
Likewise, no tax charge arises if an employee uses a workplace charger to charge an electric company car. There would, in any event, be no tax charge in respect of electricity provided for business journeys. However, as electricity is not treated as a ‘fuel’ for company car purposes, the use of a workplace charging facility does not trigger the fuel benefit charge if the charge provided powers private journeys.
Offsite charging
The tax exemption does not apply to the reimbursement or payment of an employee’s personal expenditure in respect of charging a battery in a private vehicle away from the employer’s premises, for example, at a motorway service station. Where the vehicle is used for business journeys, mileage allowances may be paid tax-free up to the approved amount.
However, no tax charge arises in respect of the provision of electricity for a company car for private mileage as electricity is not treated as a fuel for the purposes of the fuel benefit charge.
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