By Julie Hamilton, Personal Tax Manager
We are seeing many fully electric or hybrid cars being acquired personally or made available to employees. For company car drivers the initial consideration when an employee chooses a company car will be the benefit in kind (that they will be taxable on) in relation to the provision of the car. The rates of car benefit for the current tax year vary from 2% to 37% with the lowest rate applicable to cars with zero CO2 emissions, or those below 50g/km with an electric mileage range of over 130 miles.
Whilst many EV charging points were previously free to use, they are now chargeable and therefore company car drivers of electric and hybrid cars also should consider the running costs and tax implications of charging the car.
The Tax and National Insurance implications of charging an employee’s electric car will depend on who owns the car and who pays for the electricity used to charge the car, as follows:
Company Car
- Company pays to charge the car – there are no reporting requirements for the company and no tax or NIC is due on the electricity used to charge the car.
- The employee charges the car personally – there are no reporting requirements for the company and no tax or NIC is due on the electricity used to charge the car. The employee can claim for business mileage at HMRC’s approved rates. HMRC’s approved mileage rate for a company owned EV is 9p per mile.
- The employee pays to charge the car, but company reimburses the employee (both business and personal travel) – payment to employee counts as earnings and must be processed through payroll and subject to PAYE and Class 1 NIC. There are no tax or NIC implications where the employee is only reimbursed for business mileage at 9p per mile.
Employee’s own car
- Chargepoint at or near company’s workplace – there are no reporting requirements for the company and no tax or NIC is due on the electricity used to charge the car. The employee can continue to claim for business mileage at HMRC’s approved rates. HMRC’s approved mileage rates for an employee-owned EV is 45p per mile for first 10,000 miles then 25p per mile.
- Company pays for a charging card or pays to charge the car another way – the cost of charging the car is a taxable benefit for the employee and subject to tax and Class 1A NIC. The company will need to report the benefit to HMRC either via a form P11D or payroll. The employee can claim for business mileage at HMRC’s approved rates (45p per mile for first 10,000 miles then 25p per mile).
- Company reimburses the employee for cost of charging the car by the mile – where employee is only reimbursed for their business mileage, there are no reporting requirements for the company and no tax or NIC is due. If they are reimbursed for both business and personal mileage, the payment is treated as earnings and subject to PAYE and Class 1 NIC via payroll.
- Company reimburses the employee for the cost of charging the car at a flat amount – the payment will be treated as earnings and subject to PAYE and Class 1 NIC via payroll. In either case, the employee can claim for business mileage at HMRC’s approved rates (45p/25p).
If you have any queries on the above, or if we can be of any assistance to you in looking at tax efficient ways to remunerate your staff please contact Personal Tax Manager Julie Hamilton on T: 028 9032 3466 E: juliehamilton@bakertillymm.co.uk