HMRC Increases Reimbursements for Company EV Drivers

In a significant move for electric vehicle (EV) drivers using company cars, His Majesty's Revenue and Customs (HMRC) has announced an increase in the amount that can be claimed back for charging expenses. Effective from September 1st, drivers will be able to claim 8p per mile for home charging and a higher 12p per mile when using public charging networks. This update comes after concerns were raised regarding the previous single-tier system, which many found insufficient to cover their actual expenses.

Understanding the New Rates

The revised rates specifically address the discrepancies between charging at home and utilizing public charging stations. This differentiation is significant, as it adjusts for the varying costs associated with each charging method. The Advisory Electric Rate (AER) will be updated quarterly, based on several factors, including:

• The weighted average efficiency of electric company cars over the past three years, currently set at 3.6 miles per kilowatt-hour (mpkWh).
• Domestic energy prices as reported by the Office for National Statistics, which stands at £0.27 per kWh.
• The Zapmap Price Index, reflecting the average costs at public charging points, which are at present £0.51 per kWh for chargers rated at 50kW or below.

A Change in Perspective

The introduction of these new rates represents a shift from HMRC's original stance, which faced criticism for its simplistic approach. Since its launch in 2018, the AER's fixed rate of 4p per mile remained unchanged until December 2021, highlighting the slow response to rising energy prices. The quarterly adjustments, only introduced in December 2022, indicate a growing recognition of the need for flexibility in reimbursements similar to the Advisory Fuel Rates (AFRs) applied to traditional combustion vehicles. Unlike the AER, the AFR rates are tailored to account for different fuel types, engine sizes, and specific costs associated with petrol, diesel, and liquefied petroleum gas (LPG).

Efficiency and Costs

Electric vehicles (EV) can display significant variability in energy efficiency—much like their petrol and diesel counterparts. For instance, a highly efficient model like the Mercedes-Benz CLA achieves an efficiency of 5.0 mpkWh, making public charging cost approximately 10p per mile. However, less efficient models, such as the EQS SUV, may see costs rise dramatically to 18p per mile based on the same data used by HMRC. This disparity underscores the importance for drivers to understand their vehicle’s performance and associated costs, especially when choosing charging sources.

It's also critical to note that the current AER does not account for the higher costs of ultra-rapid chargers, which generate output of more than 50kW. The Zapmap Price Index currently estimates that utilizing these chargers may cost around 76p per kWh, translating to approximately 15p per mile for an efficient EV like the CLA. This scenario could leave drivers with unreimbursed expenses unless they can demonstrate accurate spending to HMRC, as any excess costs might be taxed as additional income.

Benefits for EV Fleets

For fleet operators, the new guidelines provide a measure of relief. Fleets may now claim higher reimbursement rates that align with the actual costs incurred for fuel and charging. However, documentation substantiating the accuracy of these expenses is crucial to avoid any potential tax implications. Paul Hollick, chair of the Association of Fleet Professionals (AFP), applauded HMRC's decision, stating:

“This is very good news for fleets. We’ve been working alongside the BVRLA [British Vehicle Rental and Leasing Association] for some time to promote the idea of split public and private charging AER rates... HMRC has listened.”

Maximizing the Benefits for EV Drivers

To take full advantage of these new rules, EV drivers should maintain detailed logs of their charging expenses—both at home and at public stations. Understanding how to manage charging effectively can lead to significant savings and streamline the reimbursement process.

In addition, for those looking for a comprehensive solution to monitor and diagnose vehicle performance, consider using our online software for rapid AI car diagnostics, which can help you get the most accurate data on your vehicle's efficiency and performance. Check it out here.

Conclusion

The updated reimbursement rates for electric company car drivers by HMRC represent a positive step towards making EV ownership more economical and accessible. By differentiating between home charging and public charging costs, HMRC acknowledges the realities faced by drivers and fleet operators in the evolving landscape of electric mobility. As more companies transition to electric vehicles, understanding these changes and leveraging available resources will be essential for maximizing savings and maintaining operational efficiency.