HMRC updates guidance on charging company electric cars

HMRC accepts that no taxable benefit arises where an employer reimburses their employee for the cost of charging a company-owned, wholly electric car that is available for private use.

ICAEW’s Tax Faculty highlighted that it considered HMRC’s guidance and tools for the tax treatment of the reimbursement of electricity costs did not reflect the law. 

HMRC’s previous guidance said that, where an employer reimburses their employee for the cost of charging a company-owned, wholly electric car that is available for private use, the reimbursement was taxable as earnings.  

HMRC’s guidance has now been updated. It now reflects the Tax Faculty’s view that no separate charge to tax arises under the benefits code where an employer reimburses an employee for the cost of electricity to charge their company car at home, by virtue of the exemption in s239(2), Income Tax (Earnings and Pensions) Act 2003.  

HMRC states that employers will need to ensure that the reimbursement made towards the cost of the electricity is solely for the company car. This accords with the faculty’s recommendation that reimbursements claimed by employees are calculated using an accurate reading of the amount of electricity used to recharge the car. 

HMRC has also issued guidance confirming that the same applies for national insurance.

However, it should be noted that, at the time of writing, HMRC’s tool Check if you need to pay tax for charging an employee’s electric car has not been amended. 

ICAEW’s Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.

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