The guidance states that there is an Income Tax and National Insurance liability when an employer reimburses employees for the cost of charging their company-owned electric car when it is available for private use too.
However, it is widely interpreted that these reimbursements by employers to employees are, in fact, included in the car benefit charge!
Put simply, this is because electricity is not actually vehicle fuel, so the expense referred to in HMRC guidance is covered. Employees should accurately record the electricity used to recharge the vehicle and the employer pays the employee for the amount of electricity used each time.
No records mean the employer could be seen to be funding an employee's domestic electricity bill which is, of course, going to be liable to income tax and National Insurance contributions. However, HMRC accepts that there is no profit when the employer pays 5p per mile for business travel in electric vehicles, where the employee has paid for the electricity.
A number of accountancy trade bodies are talking to HMRC about this electric car tax conflict, and I'll let you know if changes will be made.
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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