New guidance suggests that company car drivers who have electric cars could be shocked to find that while they may be able to charge their company car at work for free, they may not be reimbursed for business mileage.
HM Revenue & Customs (HMRC) has decreed that electricity is not a fuel like petrol or diesel, so while the Advisory Fuel Rates (AFRs) can be used for reimbursing many company car drivers, these only apply to cars that run on petrol or diesel.
Drivers of hybrid cars, such as the Toyota Prius, can still benefit from AFRs but drivers of electric cars and plug-in electric hybrids (PHEVs) do not meet the criteria for this benefit. This is because the current AFRs are based on the average price of fuel per mile and, according to HMRC, electricity is not a fuel.
The Association of Car Fleet Operators (ACFO) is holding ongoing discussions with HMRC about electric business car mileage rates and has launched a petition for HMRC advisory fuel rates for electric cars.
There is a guide that offers advice on how to claim for business mileage for electric and PHEV cars, which now been updated in line with the latest HMRC advice on reimbursing employees for electricity supplied at their home and/or at their workplace. The change in tax rules post April 2018 removes the Benefit in Kind (BIK) for employees charging private cars at work.
This complexity puts employees with cars that just run on electricity at a disadvantage compared with those that use hybrids and those who use their own electric cars for business mileage.