HMRC has updated its Employment Income Manual to bring the guidance on charging electric company cars at home in line with the legislation.

Until now, the guidance in the Employment Income Manual (EIM23900) has contradicted the legislation in advising that if an employer reimburses an employee for charging their company car at home this would be a taxable benefit.

The taxable benefit on a company car is, broadly speaking, calculated as a percentage, based on the CO2 emissions of the car, applied to the list-price. There is no further taxable benefit in respect of maintenance, insurance or other running costs reimbursed by the employer, with the exception of fuel.

As is widely recognised, electricity, for tax purposes, is not fuel. Therefore the cost of domestic electricity incurred charging the company car at the employee’s home is, in tax law, indistinguishable from these running costs.

HMRC has now updated the guidance in EIM23900 to confirm that home-charging company cars and vans is not a separate taxable benefit as long as the employer ensures that the electricity reimbursed is solely used for charging the company car.

This is a change to the guidance but not the 20-year-old legislation. Taxpayers who have followed the guidance may be entitled to claim overpayment refunds. Check with us if you think you or your employees may have overpaid.

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