With electric cars booming (a new electric car is registered every 60 seconds in the UK), it’s no surprise that offering electric company cars to employees is becoming increasingly popular. They provide significant sustainability benefits, and carry attractive tax benefits for employees and employers alike.
However, debate over HMRC’s guidance on the treatment of related expenses – specifically regarding an employer’s reimbursement for domestic energy costs – has been growing.
HMRC previously argued that the reimbursement of costs in relation to charging a company car or van at an employee’s home was potentially taxable as income.
Following representations by several bodies, HMRC has now changed its view. It now accepts that reimbursing part of a domestic energy bill for charging an employee’s electric company car at home is exempt from tax. The exemption covers total charging costs without the requirement to split personal and business use.
HMRC has updated its guidance both in the Employment Income Manual EIM23900 and National Insurance Manual NIM0664 to reflect the change.
What it means for employers and employees
For employers — this means that a separate tax charge will not arise when you reimburse your employee for the cost of electricity to charge their company car or van at home. But any reimbursements made towards the cost of an employee’s electricity must relate exclusively to the charging of the company car or van.
For employees — this exemption only applies if you can demonstrate that the electricity was used solely to charge your company car or van.
The upshot
Overall, this change from HMRC is a welcome one. It’s good news for employers who currently offer (or are thinking about offering) an electric company car to their employees.
Making this offering more cost-effective means it’s more realistic for an employer to build electric company cars into their remuneration package more widely. It’s also a useful aid to attract and maintain good staff — not to mention the role it plays in promoting a more environmentally-friendly commute.
For more information around electric company cars or employee benefits more generally, please contact Chantelle Martinez: chantelle.martinez@ct.me
Author: Chantelle Martinez, CT: Employment Tax
