Does an employer pay tax on charging electric vehicles?

As electric vehicles (EVs) gain popularity, employers and employees alike need to be aware of the employment tax implications associated with these eco-friendly alternatives. In this blog, we look at EVs and their employment tax impact on businesses and their workforce.

In particular, we discuss the employment tax issues surrounding charging of the vehicles. The VAT issues were explained in a recent blog by Gillian McGill which you can read here.

Important factors

There are a number of factors that inform the tax position and these include:

• Who owns the car
• How the car is used
• Where the car is charged
• How the charging is paid for

As most tax withholding or reporting responsibilities fall on the employer it’s important that this information is known, and details are maintained, should evidence need to be provided.

We cover some of the most common scenarios below to illustrate the differences in taxation.

Employer owns the car

As an employer, if you own an electric vehicle, but make it available to an employee, and provide car charging facilities at the place of work, there is no benefit in kind arising as it’s connected to the provision of a taxable car, which is separately taxable.

This is also the case if, as the employer, you decide to install charging facilities at an employee’s home or pay for a card which allows them to charge their vehicle at public charging points.

Where a company owned electric vehicle is charged at the home of the employee, and the charging covers both business and private mileage, and the employer reimburses the employee for the cost of electricity used to charge the vehicle, there is no tax or National Insurance on the reimbursement payments. The employer needs to make sure that the reimbursement made towards the cost of the electricity is solely for the use of the company car.

Employee owns the car and uses the vehicle for business

If an employee uses their own electric vehicle for business as well as private mileage, and the employer allows vehicles to be charged from a charging point at work, there would be a taxable benefit arising on the cost of the electricity. The difference here is, it’s the employee rather than the employer who owns the car.

The employee is able to claim mileage allowance relief from HMRC in respect of the business miles.

There’s also a taxable benefit on the cost to the employer where the employer pays for a vehicle charging point to be installed at the employee’s home, or the employer pays for a charge card to allow employees to access public charging points.

There can also be a separate taxable benefit arising if the employer contributes to the cost of electricity used for charging a company car at home where a flat rate amount is paid.

Mileage payments

An alternative to a charging provision that some employers consider is the payment of mileage allowances.

For company EVs, the advisory rate for fully electric cars is 10p per mile from 1 September 2023. Hybrid cars are treated as either petrol or diesel cars for the purpose of advisory fuel rates.

For personally owned EVs the authorised mileage allowance payments are the same as for traditionally fuelled vehicles and are therefore 45p or 25p per business mile (as applicable).

How we can help

EVs offer numerous advantages for businesses and employees, from reduced emissions to potential tax savings. However, it's essential to navigate the complex landscape of employment tax regulations associated with their provision and the ancillary issue of charging. 

The comments above are a small indication of the tax implications of some of the most common scenarios. If you have any queries, particularly those that arise in respect of the reimbursement of electricity costs, which need to be looked at on a case-by-case basis, please get in touch with your usual contact or email enquiry@larking-gowen.co.uk.

Tessa Brown