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Benefits in Kind - Electric Cars

Benefits in Kind - Electric Cars

Matthew Grief

All zero emission cars (i.e. fully electric) will have no Benefit in Kind (BIK) for 2020-2021. This will increase to 1% in 2021-22 and will then return to the planned 2% rate in 2022-23. 

The zero-percentage rate also extends to company car drivers in pure electric vehicles registered before 6th April 2020 and hybrid cars registered from 6th April 2020 onwards with emissions from 1-50g/km and a pure electric mile range of 130 miles or more.

An advisory fuel rate (AFR) of 4 pence per mile applies to fully electric company cars, meaning that HMRC accept that payments to employees of up to 4 pence per mile for business travel in a fully electric company car will not result in a taxable benefit in kind.

If an employer’s cars are more efficient or if the cost of cost of business travel is higher, they can choose to use a different rate. However, if they pay more than the AFR and cannot demonstrate a higher electricity cost per mile, any excess will be a taxable benefit in kind. Our recommendation would be to stick with the 4p a mile as the cost to avoid HMRC scrutiny and the additional cost of maintaining evidence to support a higher claim. 

The 4p reimbursement for business mileage can apply irrespective of whether the car is charged at a “tax free” work provided facility or otherwise.

The situation for hybrid company cars remains as before, with the normal diesel / petrol AFRs applying as appropriate but they don’t benefit from all the same perks as fully electric cars.

If the company provides charging points for electric cars
There is no taxable benefit where an employer allows cars to be recharged from a vehicle charging point at work and no benefit in kind arises if the car is charged at work, regardless of the level of private mileage.

In cases where the driver has a charging point installed at their home by the employer, there is no taxable benefit. It is recommended that if it is the intention to install charge points for company cars at an employee’s home, that the employer is invoiced directly for the cost to avoid any potential doubt.

If the employer were to pay directly for the electric costs of charging the company car at home, there is no additional benefit (irrespective of use). 

The full electric cost of all business mileage is covered by section 289A of the Self-Assessment exemption and can be reimbursed by the employer. If the vehicle is for mixed use and the employer reimburses any amount over 4p per business mile, it will be a liable to tax and NIC as a BIK on the employee.