HMRC Green-Lights Tax-Free Home Charging for Company Cars

His Majesty’s Revenue and Customs (HMRC) has introduced a change benefiting eco-conscious drivers across the UK. This change, focusing on the tax implications of electric vehicle charging for company cars at home, promises a more sustainable, cost-effective future for both businesses and employees.

Flipping the Switch on Tax Rules

Previously, if your employer covered the costs of powering up your company-owned electric vehicle at home, the extra cash in your pocket was considered taxable income. Essentially, it was treated just like your salary, subject to the usual deductions. This often resulted in a financial burden for employees, potentially hampering the shift towards more environmentally friendly vehicle options.

However, HMRC has had a change of heart. They’ve updated their guidance, making the cost of charging company cars and vans at residential properties a tax-free benefit. This is a big deal, especially for industries making the shift to electric vehicles, like estate agencies and other businesses striving for a greener footprint.

Driving Through the Details

This newly introduced tax relief, outlined in HMRC’s EIM23900 manual, hinges on specific legislation — Section 239 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). Under this rule, certain payments and benefits linked to company cars and vans are exempt from tax. This includes various expenses your employer covers, such as vehicle repairs, insurance, and road tax.

Interestingly, HMRC had previously argued that this tax exemption didn’t extend to home charging costs. Their stance was firm: if your employer reimbursed you for the electricity costs of charging a company car or van at home, it was taxable.

But there’s been a significant U-turn.

“Following a review of our position, HMRC now accepts reimbursing part of a domestic energy bill, which is used to charge a company car or van, will fall within the exemption provided by section 239 ITEPA 2003,” the authority confirmed.

What This Means for You

In simple terms? If you’re driving a company car and your employer pays you back for that spike in your home electricity bill caused by charging the vehicle, you won’t be taxed on that reimbursement anymore. This applies to both cars and vans, so a wide range of workers stand to benefit.

But before you start celebrating, there’s a small catch: you need to prove that the electricity you’re claiming for was actually used to charge the company vehicle. This is a fair stipulation, ensuring that the benefit isn’t misused for covering non-work-related expenses.

Powering a Greener Future

This policy shift isn’t just about saving money; it’s a strategic move in the UK’s broader push for environmental sustainability. By making it more affordable for companies and employees to operate electric vehicles, the HMRC’s updated stance incentivises a cleaner, greener mode of transport. It’s a win for your wallet, a win for businesses, and, most importantly, a win for the planet.

So, if your employer is offering an electric company car, it might just be the perfect time to embrace the electric revolution! Not only will you be driving an eco-friendlier vehicle, but you’ll also enjoy some extra savings thanks to the taxman’s latest green light.