ICAEW challenges HMRC’s view on electric cars

The ICAEW Tax Faculty has highlighted that HMRC’s guidance on the tax treatment of the reimbursement of electricity costs for charging company-provided wholly electric cars conflicts with the law.

The Tax Faculty has spotted that HMRC’s guidance says that there will be a tax and NIC liability where an employer reimburses an employee for the cost of charging a company-owned, wholly electric car that is available for private use. HMRC sets out this interpretation in the following:

• HMRC’s online checker tool: Check if you need to pay tax for charging an employee’s electric car: Your payment to your employee counts as earnings, and
• HMRC’s Employment Income Manual at EIM23900 Car benefit: special cases: issues relating to electric cars

The Faculty’s interpretation of ITEPA 2003 s 239(2), in conjunction with ITEPA 2003 s 149(4), is that such reimbursements are included in the car benefit charge. In essence, the rationale is that electricity supplied for a wholly electric car is not fuel and so is not treated as earnings under s 149. The exemption from liability in s 239(2) would therefore appear to apply.

The Tax Faculty also notes that, where such vehicles are charged by employees at home, detailed records should be kept to make sure any reimbursement by the employer is not treated as a payment towards the employee’s domestic energy bill.

The ICAEW and other professional bodies are currently in discussions with HMRC, with a view to clarifying the position.