ACFO is claiming victory in its campaign to get HMRC to recognise the requirement for an Advisory Fuel Rate for 100% electric cars.

Calling it an Advisory Electricity Rate, the EV AFR will be introduced from September 01, 2018.

The rate has been set at 4p per mile and will be published alongside Advisory Fuel Rates for petrol, diesel and LPG cars based on engine size.

However, plug-in hybrid and hybrid cars will continue to be treated as either petrol or diesel models for mileage reimbursement purposes.

In notifying ACFO of the introduction of an Advisory Electricity 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.”

ACFO chairman John Pryor said:

“I am delighted that HMRC has listened to the voice of ACFO and its members and introduced an Advisory Fuel Rate for 100% electric cars and at the rate we recommended.

“Historically, HMRC has consistently said that it did not consider electricity to be a fuel so for it to make this change is a major leap and will assist all fleets operating and seeking to introduce pure electric cars.”

Still no AFR rates for plug-in hybrids

However, he continued: “We are disappointed that HMRC has not supported ACFO’s call for Advisory Electricity Rates to be introduced for plug-in hybrid petrol and diesel cars and range extended electric vehicles.

“Plug-in hybrid models are a major part of vehicle manufacturers’ future electrification programmes and, as a result, an increasing number of such vehicles will find their way onto company car choice lists due to their benefit-in-kind tax efficiency.

“But without an incentive linked to how such ultra-low emission vehicles are used on the road, it will not prevent drivers using the combustion engine alone in a plug-in hybrid car.

“Plug-in hybrid vehicles are at their most efficient when driven for as many miles as possible on electric power. Therefore, particularly with technology advances likely to increase the electric range of such cars, publishing appropriate Advisory Electricity Rates for plug-in hybrid cars will help to encourage drivers to use the car in the optimal environmentally-friendly way.”