HMRC outlines how businesses can reimburse electric car usage by employees

HM Revenue and Customs has set out how a business can reimburse employees for costs incurred by using electric cars for work purposes.

Previously, HMRC’s failure to recognise electricity as a type of fuel has been used by some companies as a reason for not making more use of the eco-friendly vehicles in their fleets.

Advisory Fuel Rates

Elizabeth Ward-Lewis, personal tax customer, product and process at HMRC, has now said that employers should use the “actual costs” of charging a vehicle rather than the Advisory Fuel Rates (AFR).

Speaking at a special seminar held by fleet operator association ACFO, Ward-Lewis clarified that reimbursement mileage rates can be calculated by the fleets themselves using data for miles per kWh and electricity cost data supplied by the manufacturer.

Tax code

Chris Kearsley, HMRC digital performance analyst, addressed whether company car drivers would need to wait until the end of the tax year to learn if overpayment or underpayment would be reflected in their tax code.

“If an employee takes delivery of a new car half way through the year we start them on a week one, month one basis, so we will leave the first half of the year’s payments as an underpayment, so they will pay the right amount of money as if they had the car for the whole year. The money that is outstanding then, once we have the employee’s P11D from their employer will then be rolled into the tax code for the following year,” Kearsley explained.