The Labour Party’s pledge to bring forward the ban on the sale of cars with internal combustion engines (ICE) to 2030 presents a significant shift for UK fleets.To help meet this target, fleets need to transition to fully electric cars within the next six years.
Employees who take on an electric company car may be wondering whether they can claim to charge their vehicles themselves – the same way they would be reimbursed for petrol or diesel when refuelling at a petrol station.
In light of this, Sarah Worthington of Select Fleet Solutions – a division of Select Car Leasing – highlights what employees need to know about being reimbursed for charging their electric company vehicle at home.
“In the past, reimbursement for charging an electric company car at home was viewed as taxable earnings by HMRC.
“However, legislation has recently changed after a review of the rules, and home charging of electric cars and vans is now exempt in the Income Tax (Earnings and Pensions) Act 2003 – making it tax-free.
“One major condition that needs to be met to be entitled to a tax-free refund is proving that the electricity was solely used to charge the company car or van.
“If the vehicle was used for personal reasons such as driving to and from work or stopping at the supermarket after work, the employee must pay taxes on the reimbursement.
“However, if the company EV was used for business purposes such as travelling to visit a client whilst at work or to run work errands, the reimbursements will be tax-free and employees can keep 100% of the repayment.
“Most modern home charging points can be integrated with the employer’s payroll systems, allowing employees to automatically be reimbursed for the exact amount for charging a company car at home.
“Grant-funded EV charge points must also have a data connection and be able to log usage, allowing drivers to access their usage online or via an app, which makes it a lot easier to be refunded the exact amount.”
Sarah also highlights that charging an electric company car at home rather than at public charging points is the preferred method for both the business and the employee for several reasons.
“Firstly, electricity at a residential property is generally less expensive than at charging stations, which helps keep the employer’s costs down and is much more convenient for the employee. Secondly, employees receive compensation for the exact amount of money they spend on electricity, as shown on their home electricity bills.
“Another way businesses can reimburse their staff for their electric company vehicles is to pay per mile for business travel. This is currently set at 8p per mile.
“However, reimbursing employees by the mile is not the most effective way to cover their actual charging expenses, as it may not reflect the true cost of electricity used – especially given the current high electricity prices.”
Alternative ways to reimburse employees for charging their electric company car include providing a dedicated credit or debit card for public charging, or including an additional charging allowance in their monthly pay.
