A new advisory fuel rate for electric cars has been announced; HMRC confirmed in the August 2018 issue of Employer Bulletin that they accept that there is no profit if employers pay up to 4 pence per mile when reimbursing employees for business travel in a fully-electric company car. As long as the rate paid is not more than 4 pence per mile, there is no taxable profit and no National Insurance liability, and no need to report the payment to HMRC.
However, if payments are made to employees for business travel in a fully-electric company car at a rate in excess of 4 pence per mile, any excess over 4 pence per mile represents a profit liable to tax and National Insurance, unless the employer is able to demonstrate to HMRC that the actual electricity cost per mile is higher than 4 pence.
Although electricity is not considered a fuel for tax and National Insurance purposes, the introduction of an advisory rate for electric vehicles places a cap on the amount that can be paid tax-free to employees with electric company cars to reimburse them for the cost of their own electricity used in charging the car. There is no taxable benefit if the employee charges his or her company car using employer provided electricity. The exemption for workplace charging points is to be extended, from 6 April 2019, to employees who charge their own electric vehicles using an employer- provided charging point at or near the place of work.
The advisory rate for electric cars will be published alongside the advisory fuel rates for other fuels, which are published quarterly and are available on the Gov.uk website.