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Getting Started: Reimbursement for Electric Vehicles

6 min to readElectric vehicles
Establishing an effective reimbursement policy can help reduce both costs and the administrative burden of running an electric fleet. Here's how.
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The era of fleets working with two fuels is over. Plug-in hybrid and electric vehicles introduce a much wider mix of 'refuelling? options for drivers, including topping up at home, at work and using the multitude of public charging networks, potentially alongside filling with liquid fuels. Managing the associated reimbursement costs is important, and there some unique considerations when setting up a policy for your electrified fleet.

What are the mileage rates for electric vehicles?

HMRC issues Advisory Fuel Rates (AFRs) every three months, a per-mile rate, calculated based on current fuel prices and average efficiency of fleet-operated vehicles. Hybrids (including plug-in hybrids) are treated as petrol and diesel cars, while a flat 5p/mile Advisory Electricity Rate (AER) applies to battery-electric cars. Rates since 24th November£2021 1 are as follows:

Petrol (including hybrids): 

Diesel (including hybrids):   

AFRs (and the AER) are used:

  • For employers to reimburse drivers for expenses incurred while driving company-owned vehicles for business
  • For drivers using a fuel card or company credit card to repay employers for private mileage in their company car

    A flat rate of 45p/mile applies for privately owned vehicles used for business mileage, reduced to 25p/mile after 10,000 miles within the same tax year 2.

How can a reimbursement policy help to control costs?

Just like their petrol or diesel counterparts, the ‘fuel’ cost per mile for an electric vehicle depends on its efficiency, driver behaviour and where they are plugged in. For example, based on average efficiency of 3.0 miles per kilowatt hour (MPkWh) of electricity 3, a Nissan LEAF Acenta (40kWh) could produce costs in excess of the 5p/mile rate, as illustrated below:

HMRC advises that businesses can adjust mileage rates up or down to suit their situation, and operators could choose to reimburse drivers on a per-mile or per-kWh basis. In either case, a tailored approach is important to ensure drivers aren’t left out of pocket and encourage cost-efficient use of vehicles. It’s worth considering the following:

  • Do your drivers have off-street parking?

A quarter of UK cars are parked on-street overnight 7 and, although there’s a growing network of shared chargepoints for residents, they’re not as cheap as a domestic energy tariff. The two largest networks, Char.gy and Ubitricity, cost 19.5p/kWh 8 and 24p/kWh respectively for their most popular tariffs. For the Nissan LEAF example given above, this equates to 6.5p/mile and 8.0p/mile.

  • Do you want to control public charging costs?

There are significant price differences between the UK’s chargepoint networks, and rates tend to be highest for fastest charging speeds and using a contactless card. Limiting reimbursement rates (per mile or kilowatt-hour) could help steer drivers towards cheaper networks or encourage the use of membership options where they are available.

  • How can you encourage correct plug-in hybrids use?

    There are no specific AFRs for plug-in hybrids, HMRC advises them to be reimbursed at the same rates as their petrol or diesel counterparts. Setting a lower mileage rate (based on a share of driving using battery power) could disincentivise drivers from never plugging in. This would reduce running costs and cut CO2 emissions for operators.

What are the tax considerations?

This depends on how the vehicle is used:

  • Business vehicles (business use only): Like petrol or diesel, electricity used for business mileage does not class as a Benefit-in-Kind. Drivers can be reimbursed for charging at home or on the road on a per-mile or per-kilowatt-hour basis, either as an expenses claim or added to their salary. Mileage rates can be adjusted to reflect actual costs.
  • Company cars (business and private use): Electricity provided for company car drivers does not count as a Benefit-in-Kind if the journey is business use. Drivers can either pay up front for home and public charging and reclaim the costs, or the employer pays for everything and drivers log private mileage, and the energy costs are deducted from their salary. If employers cover the cost of private mileage by paying for electricity home or public chargepoints, then this is classed as a Benefit-in-Kind. Charging at work became exempt in April 2018 9.

    HMRC has a tool which enables businesses to check if Class 1A NICs and Benefit-in-Kind are due, which is available here.

How can I automate my reimbursement process?

Automated reimbursement solutions introduce a single account for all charging sessions, whether at home or work, and invoice employers for business mileage automatically. These provide a more accurate indication of mileage expenses, without the administrative burden of manual expenses claims. The foundations for this ecosystem are likely already in place, as units eligible for home and workplace chargepoint grants must meet standards for connectivity and data exchange 10, 11. LeasePlan recognises that for Corporate clients capturing personal and business mileage is key to managing reimbursement. We work with a number of carefully selected suppliers to offer clients a range of reimbursement services based on your needs.

Centrica Fleet Charging Management System:

Centrica used experience from managing its own electric vehicles to develop a charging and reporting solution tailored to fleets 12. The system links to employees’ home chargepoints (regardless of manufacturer) and drivers are provided with an RFID tag to access workplace chargers and selected public networks, with usage aggregated into a single monthly statement detailing driver usage for the fleet. The report includes detail for payroll management to enable the client to easily manage their driver reimbursement via their existing payroll process.

More information: centricabusinesssolutions.com/energy-solutions/products/electric-vehicles/ev-charger-management-and-driver-app

Shell NewMotion:

Shell NewMotion offers an automatic reimbursement solution which connects drivers’ home chargers to an account which provides roaming access 13 to 17 public networks (including on-street network Char.gy 14) and workplace charging via a single RFID card or app. NewMotion will then invoice the employer for charging sessions on the road, and reimburse employees directly for business-use energy drawn at home minimising impact of drivers personal cash flow.

Shell also provides a mixed-use fuel card designed for fleets with electric and ICE vehicles, which includes both chargepoint access and payment for petrol or diesel, enabling operators to minimise fleet administration and keep costs under control.

More information: newmotion.com/en-gb/location-solutions/business-charging

The Miles Consultancy (TMC):

TMC’s reimbursement service for electric vehicle charging can take in and collate data from domestic, company and public charging, ensuring cost-effective and fair reimbursement. More information: https://themilesconsultancy.com/charging/

REFERENCES:

1 HMRC (2020). Advisory fuel rates. online Available at: https://www.gov.uk/guidance/advisory-fuel-rates. Accessed 25 November 21

2 HMRC. (2019). Travel – mileage and fuel rates and allowances. online Available at: https://www.gov.uk/government/publications/rates-and-allowances-travel-mileage-and-fuel-allowances/travel-mileage-and-fuel-rates-and-allowances. Accessed 26 Apr. 2021.

3 Nissan Europe. (2018). New Nissan LEAF – Technical Specifications. online Available at: https://europe.nissannews.com/en-GB/releases/release-4998e5348457f2eb794c5aeb111c7690/download. Accessed 26 Apr. 2021.

4 Department for Business, Energy & Industrial Strategy (2021). Annual domestic energy bills. online GOV.UK. Available at: https://www.gov.uk/government/statistical-data-sets/annual-domestic-energy-price-statistics. Accessed 26 Apr. 2021.

5 BP Pulse. (n.d.). Polar Network Pricing. online Available at: https://network.bppulse.co.uk/pricing/. Accessed 26 Apr. 2021.

6 Ionity. (2020). How much does it cost to charge at IONITY? online Available at: https://support.ionity.eu/en/general-questions/how-much-does-it-cost-to-charge-at-ionity. Accessed 26 Apr. 2021.

7 Department for Transport. (2021). National Travel Survey: Where vehicle parked overnight by Rural-Urban Classification: England, 2002 onwards (NTS0908) online Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/906054/nts0908.ods Accessed 26 Apr. 2021.

8 char.gy. (n.d.). Pricing. online Available at: https://char.gy/pricing  Accessed 26 Apr. 2021.

9 HMRC (2018). Workplace charging for all-electric and plug-in hybrid vehicles. online Available at: https://www.gov.uk/government/publications/workplace-charging-for-all-electric-and-plug-in-hybrid-vehicles/workplace-charging-for-all-electric-and-plug-in-hybrid-vehicles Accessed 26 Apr. 2021.

10 OZEV. (2020). Electric Vehicle Homecharge Scheme: minimum technical specification. online Available at: https://www.gov.uk/government/publications/electric-vehicle-homecharge-scheme-minimum-technical-specification/electric-vehicle-homecharge-scheme-minimum-technical-specification Accessed 26 Apr. 2021.

11 OZEV. (2020). Workplace Charging Scheme: minimum technical specification. online Available at: https://www.gov.uk/government/publications/workplace-charging-scheme-minimum-technical-specification/minimum-technical-specification-workplace-charging-scheme-wcs Accessed 26 Apr. 2021.

12 Centrica Business Solutions. (2021). EV Charger Management and Driver App. online Available at: https://www.centricabusinesssolutions.com/energy-solutions/products/electric-vehicles/ev-charger-management-and-driver-app Accessed 26 Apr. 2021.

13 Charging On-the-Go for EV | NewMotion UK. (n.d.). Charging On-the-Go for EV | NewMotion UK. online Available at: https://newmotion.com/en-gb/location-solutions/charging-on-the-go Accessed 27 Apr. 2021.

14 NewMotion (2020). NewMotion signs roaming agreement with Char.gy | NewMotion UK. online Available at: https://newmotion.com/en-gb/knowledge-centre/pressroom/chargy-pr Accessed 26 Apr. 2021.

Published at 26 November 2021
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26 November 2021
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