HM Revenue and Customs (HMRC) has bowed to campaigning from ACFO, the UK’s premier fleet decision-makers’ organisation, and will introduce an Advisory Fuel Rate for 100% electric cars from the 1st of September 2018. Calling it an Advisory Electricity Rate, it has been set at 4p per mile and will be published alongside Advisory Fuel Rates for petrol, diesel and LPG (liquefied petroleum gas) cars based on engine size.
Advisory Fuel Rates apply where employers reimburse employees for business travel in their company cars, or require employees to repay the cost of fuel used for private travel. They are deemed to be tax and National Insurance-free. Advisory Fuel Rates are reviewed quarterly and similarly, the new Advisory Electricity Rate will be kept under review.
“HMRC will accept that if employers pay up to the Advisory Electricity Rate of 4p per mile when reimbursing their employees for business travel in a fully electric company car there is no profit – there will be no taxable profit and no Class 1 National Insurance to pay,” said HMRC.
For many years, ACFO has been calling on HMRC to publish official tax-free company car Advisory Fuel Rates for plug-in vehicles. It has been ACFO’s belief that the absence of defined mileage reimbursement rates was a handicap to some organisations including plug-in vehicles on their choice lists.
Last year ACFO hosted a fleet industry summit, which included representatives of the British Vehicle Rental and Leasing Association, contract hire and leasing companies, motor manufacturers producing plug-in vehicles and fleet managers operating zero emissions and plug-in hybrid cars.
Together they called on HMRC to publish Advisory Fuel Rates for 100% electric vehicles, range extended electric vehicles, and plug-in hybrid petrol and diesel models and submitted suggested reimbursement rates and related calculations. ACFO followed that up by launching an online petition earlier this year, which to date has attracted support from fleet managers operating more than 120,000 company cars.