HMRC will introduce an advisory fuel rate (AFR) for pure electric cars from September 1 at 4 pence per mile.
The new rate called the Advisory Electricity Rate (AER), has been set at 4p per mile and will be published alongside AFRs for petrol, diesel and LPG (liquefied petroleum gas) cars based on engine size.
Plug-in hybrid and hybrid cars will continue to be treated as either petrol or diesel models for mileage reimbursement purposes.
The change comes after fleet representative body ACFO, have been campaigning for AFRs for both pure electric cars and plug-in hybrids.
In notifying ACFO of the introduction of the new rate, HMRC said: “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.
“On a similar basis to Advisory Fuel Rates, employers can use their own rate which better reflects their circumstances if, for example, their cars are more efficient, or if the cost of business travel is higher than the guideline rate.
“However, if they pay a rate that is higher than the Advisory Fuel Rate and can’t demonstrate the electricity cost per mile is higher, they will have to treat any excess as taxable profit and as earnings for Class 1 National Insurance purposes.”