The Miles Consultancy (TMC) has produced a guide showing how businesses can calculate mileage repayment rates for electric and hybrid company cars instead of using HMRC’s advisory fuel rates or approved mileage allowance payments, which only cover petrol and diesel cars
Currently HMRC does not recognise electric charging and its costs as a fuel expense but believes that employees should be reimbursed for the costs they incur for business travel.
Advisory fuel rates are paid when an employee receives a car allowance therefore it only covers the fuel cost. Approved mileage allowance payments are paid when an employee does not receive a car allowance with these rates including the cost of running a car, for example, insurance, maintenance etc, as well as the fuel costs.
Employers that have employees who drive an electric car as a company vehicle on a car allowance could pay the relevant advisory fuel rate based on the lower of the petrol or diesel tariff or they could pay the calculated cost of the electricity used from a domestic supply to charge the car. Another option would be to pay a rate that can be calculated accurately as a true cost to the employee.
Some options for employers regarding hybrid cars are:
- to pay the relevant advisory fuel rate or approved mileage allowance payments based on the petrol or diesel engine;
- pay the first 20-30 miles of each trip using the cost of the electricity then pay the full advisory fuel rate for the remaining trip;
- pay a combined figure of the electric vehicle and advisory fuel rate that can be audited fully; or
- pay a rate that can be calculated accurately as a true cost to the employee.
Currently hybrid cars are treated as either petrol or diesel cars when working out advisory fuel rates.
Paul Hollick, managing director of TMC, said: ‘We want to help business to capture EVs’ and hybrids’ fuel cost savings by applying rates that fairly reflect their real-world cost-per-mile potential.
‘Uncertainty around reimbursing for electric and hybrid mileage is undoubtedly holding back fleets’ adoption of ultra-low emission vehicles, which is a pity, given their fuel cost and tax advantages and immunity from future air quality legislation. We hope our advice will give companies the confidence to move forward with ULEVs rather than waiting for the day when, or perhaps if, HMRC respond with AFRs for plug-ins and plug-in hybrids.’
The guide can be downloaded here.
