HMRC have updated their Employment Income Manual to reflect a change in policy. This impacts employers who reimburse employees for the cost of electricity used to charge company cars and vans at home. A Benefit In Kind no longer arises on reimbursement.
Section 239 of ITEPA 2003 provides an exemption from a Benefit In Kind (BIK) tax charge in respect of payments and benefits connected with taxable Company cars and Vans. Typically this applies to repairs, insurance and road tax.
HMRC’s previous position was that this exemption did not apply to the reimbursement of electricity costs incurred when charging a company car or van at a residential property.
This position has now changed.
- As a result of their revised policy, HMRC now accept that reimbursing part of a domestic energy bill, which reflects usage in charging a company car or van at home, falls within the s.239 BIK exemption.
No separate BIK tax charge arises where an employer reimburses an employee for the cost of electricity to charge their company car or van at home.
- It will be necessary to demonstrate that the electricity was used to charge the company car or van for the exemption to apply.
- Reimbursements for the cost of electricity must relate solely to the charging of the employee’s company car or van and not to other electricity usage.
Useful guides on this topic
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