EV charging, what’s changed?

December 1st 2023

HMRC has recently changed its guidance on electric vehicle (EV) charging costs. If you are an employer who followed HMRC’s original guidance, what steps should you now take?  Audrey Rankine explains.

After a long wait HMRC has corrected its guidance on the tax and NI treatment of payments by employers to employees for electric vehicle (cars, vans and heavy goods vehicles) charging costs. It now properly reflects the law.

However, there is still a problem. HMRC has not yet corrected its online tool, “Check if you need to pay tax for charging an employee’s electric car”. The guidance it provides for reimbursement of charging costs for employer-provided vehicles, e.g., company cars, is still wrong. You should instead follow HMRC’s internal guidance.

Tax legislation includes an exemption that prevents tax or NI charges from applying to payments by an employer to pay for or reimburse costs incurred by an employee in connection with their employer-provided vehicle. For example, where an employee pays a repair bill and the employer reimburses the cost. For EVs the exemption covers the cost of charging wherever it takes place, i.e., at their workplace, home or public charging point.

The exemption only applies to employer-provided vehicles. For privately owned vehicles, payments and reimbursements to charging costs are taxable and liable to NI as earnings unless they relate to business mileage.

If you’ve followed HMRC’s incorrect guidance until now, apply the exemption from now on. Also, correct the tax and NI calculations for the current year and notify HMRC using the usual PAYE reports. For previous years, you’ll need to submit a claim for overpaid employers’ NI. Also, notify your employees that they may be entitled to a refund of tax and NI and provide them with details of the payments that were incorrectly taxed and subjected to NI.

If you provide an employee with an electric vehicle, treat reimbursement of charging costs they incur as exempt from PAYE tax and NI. Also, you should reclaim from HMRC any NI you have previously paid on such payments.

The experienced JRW Team are on hand for any queries you may have, please do contact us.