After a long wait it appears HMRC are finally providing some clarification on the tax status of employees claiming the costs of home charging company electric cars from their employers.
HMRC has updated its Employment Income Manual to bring the guidance on charging electric cars at home in line with the legislation. Having accepted that the original guidance was wrong HMRC has now introduced revised guidance which seems to try to introduce a new, unjustified, restriction.
If a company provides an employee with a company car for which there is no business use (100% private use) and the employee has to replace tyres on the car, meeting the cost personally and then claiming reimbursement from the company, does that reimbursement give rise to a taxable benefit in kind (BIK)?
No, and nobody would suggest it does. It makes no difference whether the car is used wholly privately, part private part business or wholly for business.
HMRC’s short circuit
Section 239 ITEPA 2003 (s239) reads:
"No liability to income tax arises in respect of a payment to an employee in respect of expenses incurred by the employee in connection with a taxable car or van or an exempt heavy goods vehicle."
The legislation goes on to say that this exemption does not apply to car fuel.
Until now, the guidance in the Employment Income Manual (EIM23900) has contradicted the legislation in advising that if an employer reimburses an employee for charging their car at home this would be a taxable benefit.
The cost of domestic electricity incurred charging the company car at the employee's home is, in tax law, indistinguishable from the other running and maintenance costs (insurance, repairs etc.) and should be covered by the exemption in s239. As is widely recognised, electricity, for tax purposes, is not fuel.
Following a campaign by Accountancy bodies, HMRC has now conceded that the s239 exemption does apply to home-charging company cars and vans as long as the employer ensures that the electricity reimbursed is solely used for charging the company car. The guidance in EIM23900 has been duly updated, although at the time of writing the Check if you need to pay tax for charging an employee’s electric car tool is yet to be corrected.
Wires still crossed
Skimming through the updated guidance reveals a fresh attempt by HMRC to overtax those pesky environmentally conscious taxpayers. Stage 3 of the ‘Flowchart’ under EIM23900 ‘Employee charges car at home: their employer reimburses the electricity costs’ is the question: “What is the car used for?” alongside the advice “If private use only, reimbursement is taxed as earnings. If business use only or mixed-use, go to stage 3a”.
This, again, contradicts the legislation, which does not distinguish between wholly private use, mixed business and private use and wholly business use for the purpose of calculating the BIK charge on company cars.
Interestingly, October 2023’s Employer Bulletin makes no mention of the exemption not applying for wholly private use.
Charge it back
HMRC has changed the guidance, but this is not a change to the 20-year-old legislation. Taxpayers who have diligently followed the guidance in the Employment Income Manual may be entitled to claim overpayment refunds, in some cases sizeable refunds. For example, a company director spending roughly £20 a week charging their Tesla 3 at home could claim just over a thousand pounds a year of reimbursed electricity costs.
Unfortunately for those savvy taxpayers who have been ignoring the guidance and following the legislation all along, all that’s available is the (not inconsequential) satisfaction of proving HMRC wrong.
The local picture – St Albans EV buzz!
St Albans based Accountant Chris Wallace provides a local view
“With offices in the centre of St Albans, I have seen a huge increase in the number of electric cars on the city streets. St Albans is actually starting to get quieter! Personally, the EV revolution can’t come soon enough. And help from HMRC wherever possible will only boost businesses’ green credentials – but please HMRC, make the legislation easy to understand and beneficial for businesses and employees.”
EV Fleet Facts
- Fleet car sales propped up a 24.4% rise in vehicle registrations in August 2023.
- The increase was primarily driven by BEVs (battery electric vehicles) registrations.
- With a massive 72.3% increase in BEV registrations compared with August 2022.
- Fleets sales rocketed by 58% in August 2023.
- In St Albans, 409 EVs were registered in the first quarter of 2023 alone.
HMRC rules and guidance on reimbursing electric car charging costs:
- Employers can reimburse employees for the cost of charging their company-owned electric cars at home without it being a taxable benefit.
- The exemption applies to both fully and partially private use cars.
- Employers need to ensure that the electricity reimbursed is solely used for charging the company car.
Still have questions?
If you own a business in or around St Albans and you’re considering the best strategy to upgrade your fleet to EVs, give our team a call. We will provide the advice to maximise tax savings both when buying company fleet vehicles and maintaining them.
And, of course, ‘fueling’ them... ...At HOME, or at the office.