Car Mileage Rates for Employees Travel Claims : Electric Cars


I have seen the advisory  fuel rates issued  in Feb19 and have sent them to our payroll section so that they can review our setups.  They have told me that these rates only apply to company cars - of which we have none.

They have confirmed that they are paying the same rates as petrol 0.45 p mile for our electric car  claims  (we don't have many)- Payroll say that  they are doing this in the absence of any further guidance from HMRC.  They then only claim 5% vat and are taking employees electricity bills as proof of vat.

Whilst the 0.45p per mile is a composite rate for fuel, wear and tear etc I do think that they should be showing a reduced fuel rate within this calc for electric cars.

Should these HMRC advisory fuel rates  form the basis of the fuel element for our composite rate?    I sanybody else paying  employees for electric car mileage?


  • 45p per mile is the maximum rate that can be paid on business travel without the payment being liable to employment taxes.  That is currently a fixed rate, regardless of the fuel type.

    In the absence of any HMRC guidance to the contrary - logically there should be a "fuel" element of any mileage rate paid for electric vehicles.  Although the AFRs are primarilly intended for company car allowance purposes, HMRC do accept them for VAT purposes too (see notice 700/64, final paragraph of section 8.10).  They would seem a reasonable basis - particularly if they're what you already use to determine the fuel element for petrol/diesel vehicles.  If you currently use fuel rates from another source that also publishes electric car figures, you could use those.

    Given that employees' home electricity bills would include VAT at 5%, I would suggest that VAT rate should be used, rather the 20% standard rate for petrol/diesel vehicles.

    Perhaps (particularly while the number of vehicles are low) a question is whether the VAT recovery achievable (1/21 x £0.04 = £0.0019 per mile) is worthwhile?

    There was a separate, but possibly related, issue under consideration by the CIPFA VAT Committee last year - regarding the implications of employees being able to charge electric vehicles at work.  The questionnaire was included with the March 2018 minutes and a return date of 31 December 2018 was set.  I can see from the March 2019 minutes that the item has now been removed from the agenda, but I assume that HMRC will issue guidance based on their findings in due course.

  • I know that this is now quite an old thread - but just in case it appears on any searches...

    HMRC issued a brief on this yesterday (25/05/2021)

    Their view is that VAT recovery cannot be reclaimed on the "fuel element" of a mileage allowance paid to an electric car user, on the basis that the electricity is supplied by the utility company to the employee. Presumably notice 700/64 section 8.10 will be amended at some point.

    I suppose a difference between electricity and fuel is that electricity invoices will be clearly addressed to the employee, whereas a fuel receipt is issued as a "less detailed" VAT invoice under £250, without identifying the customer.