As fleets increasingly adopt electric vehicles to cut carbon emissions, questions over the tax position relating to when and where these vehicles are being recharged and who is paying for the electricity are coming to the fore.

It is now accepted that electric vehicles will form a major part of the make up of the company vehicle fleet in the coming years.

Government-backed trials are already underway, several police forces have put electric cars on their fleets and last week, Peugeot started taking reservations for its electric car after receiving letters of intent to use its iOn from a number of companies and local authority fleets.

But with an increasing number of business drivers now behind the wheel of an electric car, who pays for the fuel – in this case electricity?

The tax rules are currently skewed in favour of the driver, allowing him to reclaim if he recharges a company-supplied electric car at his own expense and yet face no tax penalty if he gets ‘free fuel’ by charging the car at work.

The situation is even more attractive to grey fleet drivers driving their own electric cars on business.
According to the HMRC, “AMAP rates draw no distinction between the type of fuel or energy required to propel the engine of particular cars. Therefore individuals who use their own electric car will be entitled to claim AMAPs under the normal rules.”

This means an employee can claim 40p per mile when driving their electric car on business (for the first 10,000 miles).

This could in itself prove to be a major incentive to adopt electric car technology for those grey fleet drivers who take short business trips.

For example, the Nice Mega City has a range of 60 miles between charges, which take between five and eight hours.

This is enough to cover a short commute and a 50-mile return business journey.

If this is in London, then there are now an increasing number of free charging points, as well as free or discounted parking.

This means a savy grey fleet driver can get free electricity, parking and pay no congestion charge or road tax and claim £20 a day in AMAP rates for a car that will cost him nothing except for general maintenance and the initial purchase price.

Even when he pays to re-charge the car, it is likely to cost no more than 2p per mile.

The situation is also attractive for the employee when the company supplies the vehicle.

With petrol and diesel, the company and the employee are significantly worse off if the car is supplied fully expensed, i.e. with ‘free fuel’. However, this rules does not apply to electric company cars.

“There is no fuel charge for electricity for a company car so if a person is supplied with electricity by their employer, there is therefore no benefit and no tax liability,” explained HMRC.
So, with an electric car, it really is free fuel.

On the reverse, if the employee takes the company’s electric car home and recharges it at his own expense, then this is allowed to be claimed back.

“If someone recharges the battery for their electric company car at home, they would be entitled to a deduction for the cost of doing so which represents the energy cost of their business mileage,” explains HMRC. “They would not, however, be able to deduct any portion relating to commuting or other private mileage.”

The company car tax situation is also attractive, with the rate set at just 9% Benefit-in-Kind.