Background
We have reported in the past on the tax implications for both the employer and employee of providing and using electric vehicles within businesses. Generally, it is well understood that electric vehicles are very tax-efficient and the government offers a number of tax reliefs to incentivise their use and provision.
As with many areas of tax however there are grey areas, and one of the most common has been around whether a benefit-in-kind arises when charging an electric vehicle at home. HMRC have now sought to address this and have recently published amended guidance to help taxpayers understand the consequences of charging at home.
Detail
Previously HMRC had said that if an employer reimbursed an employee for the cost of charging a company owned electric vehicle, which was available for private use, then the reimbursements would be treated as earnings and taxed as such.
Legislation has long been in place that payments provided in connection with company cars and vans were tax-exempt and therefore reimbursement of costs such as vehicle repairs and road tax was not taxable. HMRC’s stance was that this legislation did not apply to the charging of electric vehicles at a residential property.
The announcement from HMRC explains that they have now accepted that “reimbursing part of a domestic household energy bill, which is used to charge a company car or van, will fall within the exemption”.
Going forwards therefore, no taxable payment or benefit will arise for reimbursing an employee who charges their electric company vehicle at home. The caveat to this is that a taxpayer must be able to demonstrate that the electricity was used to charge a company car or van and some calculation must be undertaken to work out an appropriate reimbursement.
If it is found that the reimbursement is excessive and is actually covering more than the calculated electric cost specifically for the vehicle, then the excess could be charged as earnings and taxed as such.
If you have any queries relating to the taxation of electric vehicles, please speak to our Tax Director, Jenny Marks.
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