Getting Started: Reimbursement for Electric Vehicle Fleets

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 at public charging networks, potentially alongside filling with liquid fuels. A robust reimbursement process is vital to help encourage cost-effective charging and reduce administrative challenges.

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 9p/mile Advisory Electricity Rate (AER) applies to battery-electric cars.

Rates since 1 June 2024 [1] are as follows:

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].

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. Those costs have been more volatile than usual since the start of 2022.

For example, based on average efficiency of 4.1 miles per kilowatt hour (MPkWh) of electricity, a Volkswagen ID.3 could leave drivers out of pocket if they were reimbursed based on the 9p/mile AER, 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:

A quarter of UK cars are parked on-street overnight [8] 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 39p/kWh [9] and 45p/kWh [10] respectively for off-peak usage. For the Volkswagen ID.3 example given above, this equates to 13p/mile and 15p/mile.

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 per kilowatt-hour) could help steer drivers towards cheaper networks or encourage the use of membership options where they are available.

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 (assuming a share of the total mileage is done on battery power) could disincentivise drivers from never plugging in. This would reduce running costs and cut CO2 emissions for operators.

• 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, then the energy costs would be 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 [11].

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

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 all new home and workplace chargepoints are required to meet specific standards for connectivity and data exchange [12, 13].

ALD | LeasePlan recognises that for corporate clients capturing personal and business mileage is key to managing reimbursement. We work with several carefully selected suppliers to offer clients a range of reimbursement services based on your needs. Please speak to your LeasePlan Account Manager to find out more.

Prices correct as at 24.05.24

[1] HMRC. (2024). Advisory fuel rates. [online] Available at: https://www.gov.uk/guidance/advisory-fuel-rates [Accessed 24 May 2024].

[2] HMRC. (2024). 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 24 May 2024].

[3] Ofgem. (2024). Changes to the energy price cap between 1 April - 30 June 2024. [online] Available at: https://www.ofgem.gov.uk/news/changes-energy-price-cap-between-1-april-30-june-2024 [Accessed 24 May 2024].

[4] Octopus Energy. (2024). Energy price cap April 2024. [online] Available at: https://octopus.energy/blog/energy-price-cap-april-2024 [Accessed 24 May 2024].

[5] BP Pulse. (n.d.). Polar Network Pricing. [online] Available at: https://network.bppulse.co.uk/pricing/ [Accessed 24 May 2024]. [6] Gridserve. (2024). GRIDSERVE EV Charging: Network Pricing. [online] Available at: https://www.gridserve.com/electric-vehicle-charging/our-pricing/ [Accessed 24 May 2024].

[7] InstaVolt. (n.d.). Drivers. [online] Available at: https://instavolt.co.uk/drivers/ [Accessed 24 May 2024].

[8] Department for Transport. (2024). 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 24 May 2024].

[9] char.gy. (n.d.). Pricing. [online] Available at: https://char.gy/pricing [Accessed 24 May 2024].

[10] Ubitricity. (2023). ubitricity charge points: fair prices for easy charging. [online] Available at: https://ubitricity.com/en/driver/pricing/ [Accessed 24 May 2024].

[11] 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 24 May 2024].

‌[12] Department for Transport. (2021). The Electric Vehicles (Smart Charge Points) Regulations 2021. [online] Available at: https://www.legislation.gov.uk/uksi/2021/1467/contents/made [Accessed 24 May 2024].

[13] OZEV. (2023). 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 24 May 2024].