Fleet News

HMRC official clarifies advisory fuel rates for electric cars

Elizabeth Ward-Lewis

Elizabeth Ward-Lewis, personal tax customer, product and process at HMRC, clarified the position over advisory fuel rates (AFRs) for electric vehicles at an ACFO seminar.

HM Revenue and Customs’ decision not to recognise electricity as a fuel is frequently highlighted as a reason for organisations not to introduce 100% electric vehicles to their fleets.

However, Ward-Lewis said instead of using AFRs - used by employers to reimburse employees’ business travel in their company cars or for employees to repay the cost of fuel used privately - employers should use the “actual costs” of charging a vehicle.

Fleets can calculate their own reimbursement mileage rate using manufacturers’ data for miles per kWh and electricity cost data.

But, she told delegates at ‘A Day at the Taxes' approved mileage allowance payments (AMAP) used to reimburse business mileage clocked up by employees in their own vehicle applied to any car or van and were not fuel dependent.

Meanwhile, employees can see the immediate impact of vehicle changes on their tax code following the introduction by HMRC of a new online reporting system.

Pay as you earn employees are able to make changes to company car as well as fuel benefits using its online digital car service instead of waiting for HMRC to update their tax code for them.

Once employees have made the change online they will receive a revised tax code about a week later through the post.

However, a link on the system takes the employee to their own “personal account” so they can immediately view the impact of the benefit change.

Asked if company car drivers would have to wait until the end of the tax year to see if any underpayment or overpayment would be reflected in their tax code, Chris Kearsley, HMRC digital performance analyst, said: “If an employee takes delivery of a new car half way through the year we start them on a week one, month one basis, so we will leave the first half of the year’s payments as an underpayment, so they will pay the right amount of money as if they had the car for the whole year.

"The money that is outstanding then, once we have the employee’s P11D from their employer will then be rolled into the tax code for the following year.”

Provision Company car made available for private use Employee’s car used for business
Employer allows cars to be recharged from a vehicle charging point at work. No taxable benefit - electricity does not sit within the meaning of fuel so the Fuel Benefit Charge does not apply. And there is no further benefit charge as s239(4) ITEPA 2003 specifically excludes a benefit connected with a taxable car.  Taxable benefit based on cost to the employer.
Employer pays for a vehicle charging point to be installed at the employee’s home.  No taxable benefit because of S202(1) ITEPA 2003 (and S239 (4)). Taxable benefit based on cost to the employer.
Employer pays for charge card of £100 per year to allow individuals unlimited access to local authority vehicle charging point.  No taxable benefit because of S202(1) ITEPA 2003 (and S239 (4)). Taxable benefit based on cost to the employer.
Manufacturer leases battery separately to the car.  Cost of battery forms part of the list price - car will not go without it so it must be integral (like wheels).  Not taxable.
List price includes cost of battery  Use list price  
List price does not include cost of battery Use notional list price   
Employer pays to lease a battery for a privately owned car   Taxable benefit based on cost to employer 
Mileage allowances None - advisory fuel rates are based on the average price of fuel per mile - electricity is not a fuel Authorised Mileage Allowance Payments (AMAPs), and, if the employer pays less than the published rates, may claim tax relief under Mileage Allowance Relief (MAR).

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  • Sage & Onion - 25/09/2015 13:51

    Can anyone explain why HMRC use different AFR mileage rates depending upon fuel type and engine size (should be co2 based anyway these days for any form of consistency!), yet the AMAP mileage rate has no differential for fuel type and engine size? My understanding is that AMAP rates include a payment for fuel, but correct me if I'm wrong.

  • Steve - 29/10/2016 15:32

    It seems illogical to me that petrol or diesel vehicle drivers get a mileage rate dependent upon the cc of the vehicle, yet electric vehicles dont have a rate at all. In a way, it could be described as rewarding them and penalising electric car users. Also, the cost of buying an electric car is so much more expensive. Electric cars need mileage rate support. I suggest 35p per mile

  • Hybrid - 08/02/2017 11:53

    Within provisions :"Employer pays for charge card of £100 per year to allow individuals unlimited access to local authority vehicle charging point. " It say there is no benefit in kind if the company car is for private use. If the company car is used for business and private and the company pays the monthly/annual charging point station charge is there a benefit in kind? Can you also send the link from HMRC to clarify as the fact sheet does not mention this point.

    • Janet - 24/04/2017 13:26

      according to the "company car and car fuel benefit calculator" electricity is not a fuel so there is no difference in BIK between the company paying for personal use or the employee paying for it.

  • Lisa - 14/06/2017 13:37

    As a business we charge our employees for private miles. Do i charge my employee with a Hybrid with the usual Petrol rates? This doesn't seem correct because a portion of the mileage would have been run on self-generated electricity. Would be very grateful for advise.

  • Zarda - 02/08/2017 11:36

    I have a fully electric car and have leased this since March, this is a company car but to date have not received any fuel benefit. I know it says that electricity is not a fuel but it is considered so when paying for dual fuel gas and electric. Please HMRC come up with something so that this can be sorted. I still have to pay my electric bill at home on a monthly basis. So in effect I am paying to do my job.

  • Angela Adams - 29/08/2017 11:26

    I found this to be really useful and clear

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