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New tax guidance for charging electric company cars

As of October 2023, HMRC has updated its guidance on the tax treatment of charging electric company vehicles at residential properties.

This update clarifies that when an employer reimburses their employee for charging an electric company car at home, there is no ‘benefit in kind’ tax.

There is typically an exemption from tax charges when employers reimburse employees for company vehicle expenses, such as insurance, road tax, and repairs.

Previously, HMRC stated that this exemption didn’t apply to the cost of charging electric company vehicles at home, but it has now reviewed its position.

When does the tax exemption apply to company cars?

HMRC now takes the position that an employer reimbursing part of an employee’s domestic energy bill for the cost of electricity to charge a company vehicle should be exempt. This means a separate tax charge for ‘benefits in kind’ will not arise.

No taxable benefit arises if the employer allows the employee to charge an electric company car at work, provides a charge card for public charging points, or pays to install a charging point at the employee’s home.

The exemption applies to company cars or vans whether they are solely used for business mileage or private mileage, or when usage is mixed.

However, it only applies if the employer can prove that the reimbursed electricity expense was used solely to charge the company van or car.

If the employee is not reimbursed by their employer for the costs of charging a company electric car at home, they can claim a deduction from their earnings.

Guidance on National Insurance contributions (NICs) is in line with Income Tax
guidance – meaning there are no Class 1 or 1A contributions on reimbursements for employees charging electric company cars at their own residences.

Employees, employers, and directors who followed the previous incorrect guidance from HMRC should be able to claim a refund of any overpaid tax or NICs.

Need tax advice on company car taxable benefits?

More information about car benefit issues relating to electric cars can be found online in Section EIM23900 of HMRC’s Employment Income Manual.

If you are confused about how this updated guidance impacts previous or future reimbursements, whether you are an employee, employer, or director, you may want to seek professional tax advice from financial consultants.

Here at gbac, our Barnsley accountants can provide a variety of financial services, which can be tailored to your needs. These include bookkeeping, payroll, and tax management services for businesses and individuals.

For help with taxable benefits and exemptions for electric company vehicles, or any other tax issues you may need assistance with, call our team on 01226 298 298.

You can also contact us by email at info@gbac.co.uk, and we will be in touch soon.