HMRC has taken a significant step by updating its Employment Income Manual to bring guidance on the charging of electric company cars at home in line with existing legislation.

Previously, the guidance found in the Employment Income Manual (EIM23900) created confusion as it contradicted legislation, suggesting that if an employer reimburses an employee for charging their company car at home, it would be considered a taxable benefit.

Typically, the taxable benefit on a company car is determined as a percentage of the list price, based on the car’s CO2 emissions. It’s important to note that additional taxable benefits for maintenance, insurance, and other running costs are generally not applicable, except for fuel.

For tax purposes, electricity is distinct from fuel. Therefore, the recent update to the guidance in EIM23900 by HMRC clarifies that home-charging company cars and vans does not constitute a separate taxable benefit. However, this exemption is contingent upon the employer ensuring that the reimbursed electricity is exclusively used for charging the company vehicle.

This clarification is a change in guidance but not in the legislation, which has remained unchanged for two decades. Importantly, taxpayers who have followed the previous guidance may now have an opportunity to claim overpayment refunds. It is advisable to consult with tax professionals to explore whether you or your employees may be entitled to such refunds based on the updated guidance.