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Private Fuel Benefit and Plug-in Hybrid Car

Private Fuel Benefit and Plug-in Hybrid Car

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I have a client who works from home, via a Ltd Co.

He has bought a 49g/km plug-in hybrid car, through the company, and will pay the car benefit charge at 7% (for 2016/17)

The question is about private fuel, and how he can avoid the fuel benefit.

He plans to charge the car using his own electricity, but would like the company to pay the petrol (and reclaim the VAT).

So what would be the best to prove that the petrol only covered business miles ?

I am guessing that having a full business mileage log and use some reasonable mpg figure to prove that the litres of petrol purchased by the company are equal to, or less than, the business miles travelled.

Has anyone got a better idea ?

Thanks.

Replies (20)

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Portia profile image
By Portia Nina Levin
23rd Mar 2016 13:27

So is this car magically not going to use ANY fuel when it is on private journeys?

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By DMGbus
23rd Mar 2016 13:32

Hybrid cars treated as liquid fuel cars

"Hybrid cars are treated as either petrol or diesel cars for this purpose"

Above is in context of Advisory Fuel Rates:

https://www.gov.uk/government/publications/advisory-fuel-rates/advisory-...

So, here's how it works:

The car user (employee) pays for electricity and petrol then gets reimbursed a mileage rate, which for a Toyota Prius PHEV wef 1 March 2016 is 12 pence per recorded business mile.    This I consider to be the most tax eficient fuel arrangement for such a vehicle.

 

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By Mr_awol
23rd Mar 2016 13:38

Fuel

Electricity isn't fuel.  Company can pay for all of that.

Petrol is fuel.  Company cant pay for that without incurring a P11D benefit and (if VAT claimed) fuel scale charge.

Options therefore:

1) The company could pay for neither, and client can claim fuel only rate for all business miles.

2) Arguably it might be justifiable to log all miles travelled, have the company pay all the electricity, and submit a mileage claim for business proportion of petrol costs

3) The company could pay for all electricity and the client could swallow the petrol bills.

 

You will have to consider the likely outcomes of each.  I don't think I would be confident of defending option two if HMRC challenged it, and I suspect that option three might be the way forward.  Certainly having a fuel benefit is almost always a bad idea, and will probaly be particularly bad in this case.

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Portia profile image
By Portia Nina Levin
23rd Mar 2016 13:47

What electricity bills is it that the company will pay? The pecuniary liability ones?

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By DMGbus
23rd Mar 2016 13:49

ULEV factsheet link

https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

The above webpage (as it specifically applies to <75g/km CO2 vehicles and refers to petrol-hybrids) it confirms the tax arrangements outlined above, ie. no BIK on electricity were it paid for (as "electricity is not a fuel") and claim the AFR for petrol (or diesel) as appropriate.

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Portia profile image
By Portia Nina Levin
23rd Mar 2016 13:59

@ DMGBus I agree with your comments. My comment was directed at Mr_awol.

If the employer pays the employee's home electricity bill, that is the settlement of a pecuniary liability and it is taxable, however the electricity may have been used.

The employee can only get a tax-free reimbursement from their employer if they can quantify how much of their electricity bill was used to charge the vehicle and how much of that charge was used for business purposes, and only get reimbursed for that quantified element. Good luck with that one.

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By Mr_awol
23rd Mar 2016 14:39

Its straightforward really

Portia Nina Levin wrote:

@ DMGBus I agree with your comments. My comment was directed at Mr_awol.

If the employer pays the employee's home electricity bill, that is the settlement of a pecuniary liability and it is taxable, however the electricity may have been used.

The employee can only get a tax-free reimbursement from their employer if they can quantify how much of their electricity bill was used to charge the vehicle and how much of that charge was used for business purposes, and only get reimbursed for that quantified element. Good luck with that one.

I assume you haven't dealt with any of these personally.  My clients are all able to tell exactly how much their vehicles have drawn from their home charging stations.  It takes no luck whatsoever.  Just £290 to install the socket*.  They can even advertise it for other tree huggers and Congestion charge dodgers to use if they like (and set their own tariff)

As for how much of the electricity used to charge the car went on business journeys - that is irrelevant since, as ive stated already, electricity isn't 'fuel' for the purposes of calculating a car 'fuel' benefit.

 

* Ive not got any clients who haven't stumped up for a proper charging station, since they are cheap and apparently safer than trailing an extension lead out of the bathroom window.  Bearing in mind that the clients I have with these are driving round in c£100k EVs, I haven't come across anyone too tight to put the unit in.

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Portia profile image
By Portia Nina Levin
23rd Mar 2016 14:59

Yes but...

Mr_awol wrote:

As for how much of the electricity used to charge the car went on business journeys - that is irrelevant since, as ive stated already, electricity isn't 'fuel' for the purposes of calculating a car 'fuel' benefit.

But you are not calculating a fuel benefit, are you, if the employer is paying for or reimbursing any part of the employee's home electricity bill?

You are calculating the (partial) settlement of pecuniary liability or an amount of earnings, and if it does not WHOLLY represent a business expense then it is ALL liable to Class 1 NIC and is taxable (through PAYE for the reimbursement and via P11D for the pecuniary liability) with a deduction being available for the business expense element for tax purposes only.

The business expense is the cost of the electricity that has been used for business purposes.

In time HMRC will be telling all your clients that you have so cleverly advised.

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By Barkster
12th Apr 2016 15:46

Clarification of Electricity recharge

The vehicle charging point has a separate meter on it.

The company would not pay the employee's electricity bill, rather the actual amount of electricity consumed by the car, or a proportion thereof based on the business miles travelled.

But as was helpfully pointed out earlier, electricity is not "fuel" so the employer could pay all of the electricity consumed by the car during charging (per the meter) without a private fuel benefit arising (presumably).

Then it comes down to what to do about the petrol side of things.

Suck it up privately I think might be the answer.

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By Lady Carrera
12th Apr 2016 16:30

To clarify your clarifiication.

Separate meter or not, the employer is reimbursing (some or all of) the employee's home electricity bill. That is not a benefit in kind; it is pay.

To the extent that the employee has incurred a business expense they can claim a deduction from that pay to the extent that the cost of electricity so provided by the employee has been used for business purposes.

If the reimbursement exceeds the business proportion of the expense you have taxable remuneration. It is not a benefit in kind.

It is the case that there can be no fuel benefit in connection with the provision (by the employer, usually at their premises), by virtue of ITEPA 2003, section 149(4), which says:

"References in this section to fuel do not include any facility or means for supplying electrical energy or any energy for a car which cannot in any circumstances emit CO2 by being driven."

Note though that section 149(4) does not strictly apply to hybrids, if there are circumstances in which it can emit CO2 by being driven. Personally I would interpret that to mean that a plugin hybrid would not fall within the definition. It could be argued though that it is within the definition. I doubt though that HMRC would pursue this particular point in practice.

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By Mr_awol
12th Apr 2016 16:33

Depends on what they are paying for

PNL has taken the standpoint that the director would be paying for the electricity 'as if it were a fuel' and could then make a claim for any 'fuel' used for business purposes.

 

What actually happens with these charge points is the homeowner can open them up to other users on an individual or global basis.  Access is granted (and charging managed) by an RFID fob.  So, the following is possible:

1) Wife has a fob which she uses to access the chargepoint.  She pays for her electricity.

2) Director (with co EV) uses the company's fob to access the chargepoint.  The company pays for this electricity (as it is supplied to a company vehicle).  The director has a car benefit but no fuel benefit, since electricity isn't fuel

3) A neighbour also has a fob and uses the chargepoint occasionally.  He pays for his electricity

4) The director and his wife could open the chargepoint up to the public if they wished, but choose not to.

5) Arguably the director and his wife will be taxable on any surplus they make on the supply of electricity, so the rates have to be managed to ensure that tis either doesn't happen, or is declared.

The above is similar to a real life situation I have in mind.  I doubt one could tell if wife were to 'borrow' husband's fob from time to time.

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By Lady Carrera
12th Apr 2016 16:49

This is still incorrect

Mr_awol wrote:

2) Director (with co EV) uses the company's fob to access the chargepoint.  The company pays for this electricity (as it is supplied to a company vehicle).  The director has a car benefit but no fuel benefit, since electricity isn't fuel

There is no fuel benefit because there is no benefit. If the company reimburses any part (measured or not) of the employee's home electricity bill, that is not a benefit in kind, it is pay, and so section 149(4) does not apply to it.

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By Mr_awol
13th Apr 2016 16:11

Only if taken in isolation

Lady Carrera wrote:

Mr_awol wrote:

2) Director (with co EV) uses the company's fob to access the chargepoint.  The company pays for this electricity (as it is supplied to a company vehicle).  The director has a car benefit but no fuel benefit, since electricity isn't fuel

There is no fuel benefit because there is no benefit. If the company reimburses any part (measured or not) of the employee's home electricity bill, that is not a benefit in kind, it is pay, and so section 149(4) does not apply to it.

The points were all part of one scenario.

The employer is not reimbursing the cost of electricity.  It is one of a number of entities with access to a charge point.  In an even more ideal situation the homeowner would click the 'public access' button and put the matter beyond even your doubts.  The client that this is based on, however, doesn't want strangers parking up on his drive or running cables past any cars already on the drive (no matter how unlikely it might be that a member of the public might find and then want to use his station).

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RLI
By lionofludesch
12th Apr 2016 17:11

Example

This is an example of tax legislation struggling to keep up with technology.

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By DMGbus
12th Apr 2016 18:33

Employee pay for fuel and reclaim

I expect that the most efficient arrangements for a Plug In Hybrid Electric Vehicle (PHEV) is as follows:

Charge up the car at company premises on electricity bill in company name - no BIKReclaim AFR as publishedPetrol (or diesel) to be paid for by employee

For the record runnng costs in one example have turned out to be 2.27p per mile for electricity and 7.47p per mile for petrol, so the AFR can be quite profitable (and tax free) for a PHEV driver being reimbursed at official published rates.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

If you have a petrol-hybrid car, you can use AFR petrol rates; if you have a diesel-hybrid car, you can use AFR diesel rates. There is no HMRC set AFR equivalent for pure electric vehicles because electricity is not considered to be a fuel for the purposes of Car Fuel Benefits legislation.

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By bassanclan
13th Apr 2016 17:25

From what I can see it might be more worthwhile the person buying the car himself.

 

E.g. Toyota Prius P11D value £33340

[email protected]% £2334

 

Whereas if the person bought the car themselves they could claim 45p from the company for their business mileage and it might cost them significantly less. It depends on his mileage.

He could borrow the money from the company if needed at the 3% HMRC approved rate.

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By Mr_awol
14th Apr 2016 10:22

Depends on the car

bassanclan wrote:

From what I can see it might be more worthwhile the person buying the car himself.

 

E.g. Toyota Prius P11D value £33340

[email protected]% £2334

 

Whereas if the person bought the car themselves they could claim 45p from the company for their business mileage and it might cost them significantly less. It depends on his mileage.

He could borrow the money from the company if needed at the 3% HMRC approved rate.

It might work on an outright purchase of a Prius, or a Gee Whizz, although is often a nightmare to estimate residual values and/or maintenance costs for some of the newer cars.  Nearly all of the clients I've advised on this are leasing, and all of them have vehicles with list prices of c£100k (BMW i8, Tesla Mode S, Porsche Panamera)

Hybrids get more complicated for fueling options, so each one needs detailed plan

 

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By Barkster
15th Apr 2016 12:32

And what about Charging cards ?

I have just taken out and "topped up" a Polar Instant card (or app actually) which enables me to charge my electric car at some public charging points.

I topped up the card with £20 from my Ltd Co bank account. 

It's not fuel, and it's not settling any pecuniary liability of mine, so is that OK ?

Where do I put it in the accounts ?!!

 

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By RTFMorSTFW
15th Apr 2016 12:57

That would be a non-cash voucher, but would be exempt under ITEPA 2003, s. 269.

Motor expenses?

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