HM Revenue & Customs (HMRC) have now confirmed the position for employees being reimbursed by their employer in relation to home electricity costs. There was always some confusion as to whether this would trigger a Benefit in Kind (BIK). However, HMRC have now made the treatment clearer, and its good news for the employee (if you have a generous employer!).
An employer can now reimburse an employee for the electricity costs when charging their company car at home, regardless of whether or not the company car is solely used privately, for business or mixed use. The exemption now extends to mean there is no separate charge to Income Tax or National Insurance on the reimbursed amounts.
It should be noted that the exemption only applies providing it can be demonstrated that the electricity was used to charge the company car. Employers will need to ensure that the reimbursement made towards the cost of electricity is solely for the taxable company car and not for any other electric vehicles i.e. a privately owned vehicle. We would therefore recommend a log is kept as evidence, to support any reimbursed amounts being made.
It is still unclear from HMRC as to whether the reimbursement to an employee for costs incurred when charging their company car at a public charging station also falls under this exemption. Within the HMRC manual provided below, it states that where an employee is provided with a ‘charge card’ (which is paid for by the employer) then this will fall under the exemption. We will ensure we keep you updated if more guidance is released in due course.
If you are not provided with a company car and you use your own personal electric vehicle for business journeys, then you may still be entitled to Income Tax relief. The Advisory Fuel Rates will apply for business journeys (just like petrol and diesel company cars) and from 1 September 2023 each mile can be reimbursed by an employer at 10p, without any Income Tax or National Insurance implications. Any amounts in excess of the rates would be taxable. If less than rates, an employee may claim appropriate amount of tax relief under Mileage Allowance Relief (MAR) for business miles.
Further Information
If you would like to discuss the tool in more detail or your tax affairs in general, please contact your usual NRB advisor or our Tax team.
Useful Links
HMRC Guidance: EIM23900 – Car benefit: special cases: issues relating to electric cars – HMRC internal manual – GOV.UK (www.gov.uk)
HMRC Advisory Fuel Rates: Advisory fuel rates – GOV.UK (www.gov.uk)
MAR Claim: Claim tax relief for your job expenses: Vehicles you use for work – GOV.UK (www.gov.uk)
