The Government says it is happy for drivers of electric vehicles (EVs) to be reimbursed at the Approved Mileage Allowance Payment (AMAP) rate of 45 pence per mile (ppm). However, nearly three-quarters (71%) of respondents to a Fleet News poll disagree, suggesting the level is flawed.
HM Revenue and Customs (HMRC) set a pence per mile (ppm) rate at which employees driving their own vehicle on business can be paid without having to pay tax. Grey fleet drivers can be paid up to 45ppm tax-free for the first 10,000 miles in the tax year and 25ppm thereafter.
The payment is designed to reimburse employees for fuel used alongside other running costs, such as service, maintenance and repair, depreciation and insurance.
However, as EV drivers do not have to pay pump prices to fuel their car, does the Government need to review AMAP rates before more employees embrace the technology?
HMRC doesn’t think so. It believes the rates are at the correct level because EV drivers have to pay a premium for their vehicle compared with a diesel or petrol car.
A HMRC spokesman said: “Depreciation, for example, may form a much higher proportion of an electric car’s costs per mile.”
Not everybody who responded to the Fleet News survey believed EV drivers should be given less money.
One respondent said: “They should be given a higher rate as an incentive to embrace the technology.”
EV sales are still low, despite the Department for Transport reporting a year-on-year increase in registrations for the Plug-in Car Grant scheme.
Since January 2011, motorists purchasing a qualifying ultra-low emission car have been able to receive a grant of 25% towards the cost of the vehicle, up to a maximum of £5,000. As of June 30 – the latest figures available – 4,553 claims had been made through the scheme, some 1,500 of them in the first half of 2013. However, the vast majority of EV sales so far have been to businesses rather than private.
Gateshead Council uses EVs in its pool car fleet, but has none registered with its grey fleet.
Nevertheless, fleet manager Graham Telfer echoed HMRC’s view that drivers pay substantially more for an EV, even with the Government grant included.
“The number of privately registered EVs is very low at the moment, but it’s something we would explore when it becomes more apparent,” he said.
The Government has said it will keep the rates under review, but the HMRC spokesman added: “Minsters are satisfied that they currently provide a fair remuneration for drivers using their own cars for business mileage.”
One solution for employers is to pass some of the responsibility for EV reimbursement to the Government by paying below the AMAP rate. Employees can claim tax relief via Mileage Allowance Relief on any amount below AMAP, which saves the company money without the employee losing out.