Shift in electric car tax rules do not go far enough

While the Association of Taxation Technicians (ATT) welcomes the new tax exemption for employees charging their personally owned electric car at work, it would like to see HMRC address the complicated tax rules of reimbursing employees for business travel in company owned electric vehicles.

The Government published recent draft legislation for a new exemption which means that, from April 2018, there will be no benefit in kind charge on electricity that employers provide to charge electric vehicles (all-electric or plug-in hybrid), personally owned by employees.

The draft legislation confirms that the exemption will only apply to charging vehicles at or near an employee’s workplace, and will not extend to the reimbursement by employers of costs incurred by employees in charging their vehicle elsewhere, for example at a motorway service station.

If the intention is truly to incentivise the use of electric cars, then we would recommend that consideration be given to widening its scope so that it extends to charging away from the workplace.”
The exemption set out in the draft legislation also only applies to cars which are personally owned by employees. Electric company cars have their own tax rules, which can be difficult to apply in practice, says the ATT.

Alongside this new exemption for personally owned electric vehicles, we would like to see HMRC address the complicated tax consequences of reimbursing employees for business travel in company owned, as distinct from personally owned, electric vehicles.

Where an employee charges a fully electric company car themselves, their employer cannot use the standard Advisory Fuel Rates (AFR) to reimburse them.Instead, they are required to adopt a more complicated treatment, which requires them to identify the cost of the electricity used during the business miles travelled. This can be very difficult where a company car is charged at home, as it will be difficult to isolate the exact cost of charging the car from the overall electricity bill for the household.

To avoid this, we would like to see AFRs, or a similar standard benchmark rate, extended to company electric cars.