HM Revenue & Customs (HMRC) has made an important change to the rules surrounding the tax treatment of electric charging for company cars and vans at residential properties.
Previously, HMRC considered any reimbursement made by an employer to an employee for charging a company-owned electric car at home as taxable earnings.
However, HMRC has now updated their stance, and these reimbursements are now tax-free benefits.
This change is reflected in the updated EIM23900 manual and is anchored in Section 239 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003).
This section already provides tax exemptions for various payments and benefits related to company cars and vans, such as vehicle repairs, insurance, and road tax.
What does this mean for you?
If you’re an employer who reimburses your employees for the cost of electricity used to charge their company cars or vans at home, this reimbursement is no longer taxable.
That means a more cost-effective and straightforward approach to encouraging the use of electric vehicles within your company.
It’s important to note that this exemption will only apply if you can demonstrate that the reimbursed electricity costs were exclusively for charging the company vehicle. Therefore, meticulous record-keeping is essential.
Key action points for employers
1. Review and Update Policies: Make sure your reimbursement policies are up to date with this new tax treatment.
2. Communication: Clearly communicate this change to your employees so they are aware of the updated tax benefits.
3. Record-Keeping: Maintain accurate records to ensure that the reimbursement for electricity costs relates solely to the charging of company cars or vans.
4. Consult with Us: As always, for complex matters, it’s advisable to consult with experts. We’re here to assist you in adapting to these new regulations.
This is a promising development, especially for those interested in reducing their carbon footprint while also enjoying financial benefits.
If you need any advice on the tax and cost benefits of using electric vehicles within your business, please speak to our team.