Electric cars have become increasingly popular, offering numerous advantages, especially when used as company cars. The tax benefits associated with electric vehicles have made them an attractive option for businesses and individuals alike. However, confusion surrounding the reimbursement of electric car charging costs has been a topic of debate among advisers.
In this blog post, we will delve into the recent clarifications provided by HMRC and explore how taxpayers can benefit from tax rebates on electric car charging. If you’re looking to maximise your savings and take advantage of available tax incentives, keep reading!
Understanding the HMRC Guidance
In response to the ongoing confusion, HMRC has updated its Employment Income Manual to align the guidance on charging electric cars at home with the legislation. Initially, there was conflicting information suggesting that reimbursing employees for the cost of charging their electric vehicles at home would result in a taxable benefit. However, HMRC has now acknowledged the error and introduced revised guidance.
Tax Benefits of Home-Charging
The revised guidance confirms that the reimbursement of home-charging costs for company cars and vans does not give rise to a taxable benefit in kind (BIK). This means that employers can reimburse employees for the cost of charging their electric vehicles at home without incurring additional tax liabilities. As long as the electricity reimbursed is used solely for charging the company car, the exemption applies.
Claiming Tax Rebates
Taxpayers who have diligently followed the previous guidance and incurred costs for home-charging their company cars may be entitled to claim tax rebates. These rebates can potentially result in significant refunds for overpaid taxes. For example, a company director who spends approximately £20 a week on charging their Tesla 3 at home could claim over a thousand pounds per year for reimbursed electricity costs.
Taking Advantage of the Legislation
It’s important to note that the legislation does not distinguish between wholly private use, mixed business and private use, or wholly business use when calculating the BIK charge on company cars. This means that taxpayers who have followed the legislation instead of the contradictory guidance in the Employment Income Manual can still benefit from tax rebates.
In conclusion, the recent clarifications provided by HMRC regarding tax rebates on electric car charging have brought much-needed clarity to the topic. Employers can now reimburse employees for the cost of charging their company cars at home without incurring additional tax liabilities. Moreover, taxpayers who have followed the legislation, rather than the contradictory guidance, may be entitled to claim.
If you’re interested in learning more about tax rebates and electric car charging, reach out to our tax experts at DSW Tax Advisory. We are here to help you navigate the complexities of tax regulations and ensure you make the most of available benefits. Contact us today to schedule a consultation and start saving!
