Electric Cars – Topical Q&A

In our Autumn Budget webinar, a hot talking point was the taxes surrounding employer provided electric cars. While there was no Budget change in this regard, it is a good time to refresh memories and prepare for questions that clients ask. Below is a summary of our webinar Q&A.

What’s the latest with benefits in kind in relation to electric cars?

The appropriate percentage applied to the list price to compute the benefit in kind is currently 1%. This will increase to 2% in 2022/23. See EIM23900 when determining the list price and, in particular, ensuring it includes the cost of the battery.

What about fuel? Can an electric car trigger a car fuel benefit in kind?

A car fuel benefit cannot arise on an employer provided electric car as s149 ITEPA 2003 is clear that ‘fuel’ does not include any facility or means for supplying electrical energy.

However, if the employer reimburses the employee for home electric charging costs and there is an element of private mileage, the reimbursement is taxed as earnings. See the flowcharts within EIM23900.

Is there still a 100% capital allowance on electric cars?

Under s45D of the Capital Allowances Act 2001, a 100% first year allowance is available for new and unused electric cars. This currently applies to expenditure incurred on or before 31 March 2025.

On disposal, the sale proceeds are deducted from the general pool. If there is an insufficient tax written down value in the general pool, a balancing charge will arise.

What can the employee claim for business mileage undertaken in a company electric car, after incurring home electric car charging costs?

Employers may pay (without tax consequence) 4p a mile for business mileage undertaken in a company electric car.

What about electric cars used by the proprietor of a sole trade or partnership? If the electric car is charged at home, can you confirm that the business does not need to pay a VAT Fuel Scale Charge (FSC)?

HMRC's guidance (Revenue & Customs Brief 7/2021) states where the electric car is charged at home, the business is not entitled to reclaim any input tax on the charging costs. Therefore, no FSC is payable.

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