Recently released draft HMRC guidance sheds more light on the tax treatment when an employee charges their own electric car at work, but the treatment of business mileage payments relating to electric cars continues to leave many in the dark.
This article looks at what the draft guidance tells us about the expected scope of the new workplace charging exemption, before looking briefly at the difficulties that can arise where an employer wants to reimburse an employee for business mileage in a pure electric or hybrid car.
Employer provided charging
If an employer provides electricity to charge a company car, then no benefit in kind charge will arise regardless of the level of private mileage or where the car is charged. This is because tax law does not treat electricity as a “fuel”, and therefore the usual fuel benefit charge for company cars (s149 ITEPA 2003) cannot apply. It should, however, be noted that a fuel benefit charge can still arise in respect of diesel or petrol provided for a hybrid company car.
The situation is more complicated when it comes to personally owned electric cars. Until 5 April 2018, if an employer provided electricity to charge an employee’s personal car then a taxable benefit in kind would arise. However, it was announced at the Autumn Budget 2017 that, from 6 April 2018, a new exemption would apply. This exemption has not yet been legislated (it is expected to be included in Finance Bill 2018-19 later this year), but HMRC have now published draft guidance for consultation.
The draft guidance (which can be found here) is only two pages long, but does provide some clarity over the intended scope of the new exemption. In particular, it states that where an individual is provided with workplace charging facilities for their own car or van no taxable benefit arises provided that all of the following three conditions are met:
- The electricity is provided through a dedicated charging point;
- The charging facilities are provided at premises under the control of the employer; and
- Charging is available to either all the employer’s employees generally, or all the employer’s employees generally at a particular location.
As noted in the ATT’s submission to HMRC (which can be found here), the draft guidance raises some interesting points:
- The exemption appears to be narrower in scope than the original announcement at the Autumn Budget, which referred merely to “electricity that employers provide to charge employees’ electric vehicles”. In particular, the guidance specifically states that the exemption does not apply if an employer pays for an employee to charge their car away from the workplace, such as at a motorway service station.
- The requirement for a dedicated charging point means that plugging a car into a normal mains power socket at work will not qualify for the exemption.
- Presumably “premises under the control of the employer” is intended to cover a workplace which is either owned or leased by the employer. But could it extend further to include a place owned or leased by a third party (for example a car park, warehouse or depot) where an agreement is in place with the employer to allow charging of employees’ cars there?
Business mileage payments
The workplace charging exemption, though narrow in scope, provides some clarity over the treatment of workplace car charging. However, the treatment of payments made to employees for business mileage in electric cars remains an area of confusion.
In general, the treatment of business mileage payments will depend on whether:
- The car is personally owned by the employee or is a company car; and
- For company cars, whether the car is pure electric, or a hybrid.
Personally owned cars
If an employee uses their own electric car for business purposes, Approved Mileage Allowance Payments (AMAPs) apply in the same way as for petrol or diesel cars:
- Any reimbursement by the employer for business mileage is tax and NIC free provided it is no higher than the AMAP rates.
- Reimbursements in excess of the AMAP rates are taxable and must be reported to HMRC.
- If the employer reimburses at a rate lower than the AMAP rates, the employee can claim Mileage Allowance Relief.
The situation for hybrid company cars is relatively straightforward – the normal diesel / petrol Advisory Fuel Rates (AFRs) can be used to reimburse employees for business travel where the cost of fuel (whether petrol / diesel or electricity) was incurred personally.
The situation however becomes much more complicated for pure electric company cars. As noted above, tax law does not treat electricity as a fuel. This means that, where an employee charges a pure electric company car themselves, their employer cannot use AFRs cannot to reimburse them.
If the employee is reimbursed, then the tax treatment depends on the use of the car:
- Business use only – the s289A ITEPA 2003 exemption for paid or reimbursed expenses will exempt the amount received.
- Personal or mixed use – the reimbursement is taxable as earnings, with the employee entitled to a deduction for the cost of business miles travelled.
If their employer does not reimburse them, they should be entitled to a deduction under s337/s338 ITEPA 2003 for the actual electricity cost of business miles travelled.
This raises the practical difficulty of identifying the cost of the electricity used during business miles travelled. This may be more straightforward where a commercial charging point is used, but could be difficult to establish where a company car is charged at home.
This complexity puts employees with pure electric company cars at a disadvantage compared with those with hybrid company cars (and those who use their own electric cars for business mileage). In the absence of any obvious policy rationale, it is to be hoped that this is something the government will rectify in the near future.
Emma Rawson is an ATT Technical Officer.
 For cars this is currently 45p per mile for the first 10,000 business miles in a tax year, and 25p per business mile thereafter.
 See https://www.gov.uk/government/publications/advisory-fuel-rates for more details on AFRs.
 A ‘plug-in’ car with an electric propulsion system only and no petrol or diesel engine.
 A car which combines a conventional petrol or diesel engine with an electric propulsion system.