New car and van fuel exemption - details revealed
Tax and fuel
Most job-related perks are taxable, and fuel for cars and vans paid for by businesses for their employees (including directors) is no exception. The taxable amount depends on whether the vehicle is a company car or van, or one owned by the employee (see The next step ). A newly introduced exception to this rule is electricity for plug-in hybrid and electric vehicles.
Tax-free benefit in kind
Electricity paid for by employers, whether directly or reimbursed to employees, is tax and NI exempt, even if the fuel is used for private journeys. However, until 6 April 2018 fuel paid for by employers and used for private journeys in a car or van owned by an employee was taxable to the extent it was used for private journeys. Since then no tax or NI charge applies.
What’s covered and what’s not?
The new exemption covers the cost of: electricity, the installation of charging facilities and any “connected services”, e.g. leasing costs for the charging equipment. The exemption doesn’t apply to charging costs paid by employees while away from the employer’s premises, for example at a motorway service station, but there’s an alternative tax-free payment you can make.
Tip. If you reimburse employees for charging their cars or vans away from your premises, and they use them for business journeys, you can pay a tax and NI-free approved mileage allowance payment (AMAP), or if you don’t pay them they can claim an equivalent tax deduction (see The next step ).
Conditions for the new exemption
As you would expect, there are conditions to the new exemption. These are:
- electricity must be provided through a dedicated charging point, i.e. one that’s specifically designed only for charging plug-in hybrid and electric vehicles
- charging facilities must be provided at your premises or at a location you control. The exemption won’t apply if, say, the charging facilities are at the employee’s home
- charging must be available to all your employees. This condition is met if you, say, provide facilities to all employees at one branch, depot, etc., but not others. For example, you could provide the perk to all those at head office, but not to staff at other locations.
Tip. The exemption can apply to any vehicle where your employee is the driver or passenger.
Example. Keith is a director of Acom. He and his wife Sue each own plug-in hybrid cars. She drives him to work a couple of times each week using her car, otherwise Keith uses his. Acom recently installed a charging point at its offices which both Keith and Sue use to charge their cars. The exemption applies regardless of which car is used, as long as Keith is a passenger in the vehicle.
In practice. The exemption will be hard for HMRC to police as it won’t have any knowledge of who uses the car that’s charged. Therefore, as the employer, it will largely be up to you to decide when the exemption applies.
For information on the tax charges and on AMAPs, visit http://tipsandadvice-business.co.uk/download (CD 19.15.03).
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