There are many more electric vehicles on the road now, particularly small commercial vans.
When charging the van at the company’s base there is no taxable benefit for the employee, and the company pays for the electricity. The VAT charged on the electricity used can be reclaimed by the company, but only in respect of the power used for business journeys. An electric van will normally have 100% business use, as even if it is kept overnight at the employee’s home the journey from home to work appointments in the van is not treated as commuting.
Where the van is charged at a public charging point there will be a bill issued for each charge which can be either paid directly through the company’s account or by the employee and reimbursed by the employer. This bill will include VAT at the standard rate of 20%. The employer can recover the VAT on this cost for powering the company’s vehicle as the electricity used should be entirely for business purposes.
Where the electric van or car is charged at the employee’s home, the employee will have paid VAT on that electricity at the reduced rate of 5%. Although the employer may reimburse the employee for that power, the employer cannot reclaim the VAT on that cost as the VAT has been incurred by the employee and not by the employer.
There is a standard rate of 4p per business mile that may be used to reimburse the cost of business miles driven in fully electric company cars, and that could also be used for electric vans charged at the employee’s home, as HMRC has set no other alternative rates for commercial vehicles.
Where the company provides all the road fuel for a company vehicle (petrol, diesel or LPG), the company needs to account for the VAT on the fuel used for private journeys using the VAT road fuel scale charges. These tables have just been updated to apply for accounting periods commencing on or after 1 May 2021.
The advisory fuel rates for reimbursing employees who pay for the fuel used in company owned vehicles have also been updated to apply for journeys taken from 1 June 2021.
Written by the Tax Advice Network