The good news is that there will be no taxable benefit to the employee, and no National Insurance Contributions (NIC) charge will apply either. That's because the use of a credit card, in this case, is not considered a direct means of providing electricity.
"Consequently, an exemption is granted!"
Moreover, electricity is not regarded as a fuel for fuel benefit purposes, and this exemption ensures that no benefit arises, which typically applies to payments made through credit cards or other credit tokens.
It's essential to differentiate this scenario from the provision of electricity by an employer through a workplace charging point, which is covered by a separate exemption. In the latter case, the provision of electricity to a company car is considered a specific facility or means of providing electricity and the exemption encompasses the liability in connection with a taxable car and is not regarded as a fuel benefit.
Regarding National Insurance Contributions (NIC), the liability for Class 1 NIC arises when the credit card is used to pay liabilities for the benefit of the employee, as per section 6 of the Social Security Contributions and Benefits Act 1992. However, no Class 1 NIC applies in cases of business expenses or when the employee acts as an agent for the employer.
In this context, it means that informing the seller that the electricity is being purchased on behalf of the employer allows the employee to act as an agent for the company, and thus, the company credit card usage is not considered a payment for personal liability, but rather a provision of fuel by the employer.
"Importantly, it's worth noting that electricity is not considered fuel for NIC purposes!"
HMRC provides a helpful table on electric cars at EIM23900, but it is subject to changes as the rules and regulations evolve with the increasing adoption of electric vehicles.
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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