Tax benefits of providing electric cars to my staff
QUESTION: I own a small distribution business and we have introduced a “help the environment” initiative and my key salesman has just bought his own electric car and we have installed an electric charge point at the business premises. Are there tax implications for him by charging the car at the business premises?
ANSWER: If an employer provides electricity to charge a company car, then no benefit in kind charge will arise regardless of the level of private mileage or where the car is charged. This is because tax law does not treat electricity as a ‘fuel', and therefore the usual fuel benefit charge for company cars cannot apply. It should, however, be noted that a fuel benefit charge can still arise in respect of diesel or petrol provided for a hybrid company car.
The situation is more complicated when it comes to personally owned electric cars. Until April 5 2018, if an employer provided electricity to charge an employee's personal car then a taxable benefit in kind would arise. However, it was announced at the Autumn Budget 2017 that, from April 6 2018, a new exemption would apply. This exemption has not yet been legislated but HMRC have now published draft guidance for consultation.
The draft guidance states that where an individual is provided with workplace charging facilities for their own car or van no taxable benefit arises provided that all of the following three conditions are met:
• The charging facilities are provided at or near the employer's workplace;
• Charging is available to either all the employer's employees generally, or all the employer's employees generally at a particular location; and
• The exemption is not available where an employer pays for an employee to charge their car away from the workplace.
The workplace charging exemption provides some clarity over the treatment of workplace car charging. However, the treatment of payments made to employees for business mileage in electric cars remains an area of confusion.
In general, the treatment of business mileage payments will depend on whether:
• the car is personally owned by the employee or is a company car; and
• for company cars, whether the car is pure electric, or a hybrid.
If an employee uses their own electric car for business purposes, Approved Mileage Allowance Payments (AMAPs) apply in the same way as for petrol or diesel cars:
• Any reimbursement by the employer for business mileage is tax and NIC free provided it is no higher than the AMAP rates.
• Reimbursements in excess of the AMAP rates are taxable and must be reported to HMRC.
• If the employer reimburses at a rate lower than the AMAP rates, the employee can claim Mileage Allowance Relief.
For company cars, the situation for hybrid company cars is relatively straightforward - the normal diesel / petrol Advisory Fuel Rates (AFRs) can be used to reimburse employees for business travel where the cost of fuel (whether petrol / diesel or electricity) was incurred personally.
The situation however becomes much more complicated for pure electric company cars. As noted above, tax law does not treat electricity as a fuel. This means that, where an employee charges a pure electric company car themselves, their employer cannot use AFRs cannot to reimburse them.
If the employee is reimbursed, then the tax treatment depends on the use of the car:
• Business use only – the amount will be exempt from tax.
• Personal or mixed use - the reimbursement is taxable as earnings, with the employee entitled to a deduction for the cost of business miles travelled.
If their employer does not reimburse them, the employee should be entitled to a deduction under normal rules for the actual electricity cost of business miles travelled. This raises the practical difficulty of identifying the cost of the electricity used during business miles travelled. This may be more straightforward where a commercial charging point is used, but could be difficult to establish where a company car is charged at home.
This complexity puts employees with pure electric company cars at a disadvantage compared with those with hybrid company cars (and those who use their own electric cars for business mileage). In the absence of any obvious policy rationale, it is to be hoped that this is something the Government will rectify in the near future.
:: Malachy McLernon (email@example.com) is a director of PKF-FPM (www.pkffpm. com). The advice in this column is specific to the facts surrounding the question posed. Neither The Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.