New advisory fuel rates for company cars

HMRC has published updated advisory fuel rates effective from 1 December. The old rates could continue to be used until the end of last year, but any calculations from January must utilise the new amounts. 

Impact on fully electric cars

The most important amendment from December relates to fully electric cars, as the rate per mile has increased from 5p to 8p.

HMRC has also said that the electric rate will now be reviewed every quarter, in line with other advisory fuel rates. The next quarterly review is March 1 2023.

The 5p amount has been in place for a while, so with the fluctuations in energy prices, it will be interesting to see whether there will now be more regular changes.

Where a car is a hybrid, you should treat it as either petrol or diesel, rather than electric, for these purposes.

Charging company cars at dealerships

With the push to electric, motor dealers are seeing a corresponding increase in the proportion of electric vehicles in their demo and company car fleets. I’m often asked whether there are tax implications if an employee charges their company car at the dealership.

For benefit in kind (BIK) purposes, electricity is not classed as a fuel so no BIK will arise. VAT legislation is slightly different and requires an employer to either restrict the amount of input VAT they reclaim on vehicle charging, or to account for a notional output VAT charge on any private use – similar to the situation with the fuel scale charge for non-electric vehicles. The 8p per mile would be treated as VAT inclusive and can be used as the basis for these calculations.

Full details on the rates for different vehicles can be found at https://www.gov.uk/guidance/advisory-fuel-rates