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
Electric Vehicles: Update 2023
With the increased recent focus on achieving Net Zero, the government is planning to ban new petrol and diesel car sales by 2030. We review some of the tax issues that businesses and their employees may consider when acquiring or providing an electric vehicle.
Company cars
Company car tax. How do you work out car benefits? How do you work out car fuel benefit? Are there savings for low-emissions vehicles? How do you reduce car benefits? Cars and the tax tribunals and Top Tax Tips.
Vans and Commercial vehicles
What is the benefit in kind charge if you drive a company van? What is van fuel benefit? What is the tax on zero-emissions vans?
CO2 emissions: Ultra-low emission cars from 2019-20 onwards
CO2 emissions bands and percentages that apply to company cars from 2019-20 to 2027-28.
External links
EIM23900: Car benefit: special cases: issues relating to electric cars
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