HMRC’s website includes a tool to help employers determine if car-related expenses paid to employees are taxable. The trouble is the latest version includes incorrect advice. What’s the problem and how should you tackle it?
Tax experts recently spotted a problem with the advice given by HMRC’s online tool “Check if you need to pay tax for charging an employee’s electric car”. Where an employer provides a wholly electric company car to an employee it counts as a taxable benefit. If the employer also directly pays for electricity for charging the car there is no additional tax charge. The trouble is HMRC’s tool says that both tax and NI are payable.
No tax charge arises because electricity is not defined as fuel by tax legislation. Supplying it is therefore simply a cost of providing the vehicle and therefore covered by the car benefit tax charge. Representations have been made to HMRC, details of which can be found here, and hopefully its tool will be corrected soon. In the meantime, employers should not account for tax or NI on payments they make to pay for electricity used to charge company cars.
Note that the exemption from tax and NI doesn’t apply to reimbursements made by an employer of company-car charging costs paid for by employees. Instead HMRC accepts that your client can reimburse them tax and NI-free up to 5p per business mile.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.