HMRC EV mileage reimbursement: a compliance guide for fleet managers

Reimbursing business mileage for electric company cars sits in a different HMRC framework to petrol and diesel. Getting it wrong does not just mean overpaying or underpaying drivers, it can create an unplanned tax liability for the business. This guide sets out the rules fleet managers need to know.

The Advisory Electricity Rate

For company cars, HMRC sets an Advisory Electricity Rate (AER), a flat pence-per-mile figure that employers can pay tax-free for business mileage without needing to justify the actual cost. It is reviewed periodically and is deliberately simple.

The catch is that it is an average. It assumes a typical efficiency and a typical electricity cost, so it will not match reality for most individual drivers. Pay the AER and you are compliant, but you may be systematically over- or under-paying depending on how and where each driver actually charges.

Paying above the AER

Employers can pay more than the AER if they can evidence the driver's actual cost of electricity. This is where most fleets fall down, because "evidence" for home charging usually does not exist. There is rarely a separate meter for the car, and public charging receipts are scattered across multiple apps and networks.

If you pay above the AER without evidence, HMRC can treat the excess as a taxable benefit, meaning PAYE and Class 1 National Insurance become due on the difference. That liability sits with the employer as well as the employee.

Salary sacrifice cars versus employee-owned EVs

The rules differ depending on how the car is provided:

• Company cars use the AER (or evidenced actual cost) for business mileage reimbursement.
• Employee-owned EVs used for business travel, including those acquired through personal salary sacrifice arrangements, are typically reimbursed under Mileage Allowance Payments (MAP) rules, using the standard 45p/25p rates, which are fuel-agnostic.

Fleet managers running mixed fleets, company cars alongside salary sacrifice or grey fleet EVs, need to apply the right basis to the right vehicle type. Mixing them up is a common and avoidable compliance error.

Building an evidence trail

An HMRC-defensible process needs to show, per driver and per period:

• Total business miles claimed
• Where charging happened (home, work, public)
• The rate paid or applied at each location
• The calculation linking cost to miles reimbursed

Manually assembling this from home energy bills, workplace charger logs and public network receipts is realistic for a handful of drivers, not for a fleet.

What good practice looks like

Step	What it involves
Capture	Record charging sessions automatically across home, work and public
Calculate	Apply the correct cost per session, not a flat assumption
Reconcile	Match charging cost to submitted business mileage
Report	Produce a per-driver record that stands up to an HMRC query

This is the gap our Reimburse product is built to close: it automates capture and calculation so fleet and payroll teams get a compliant, evidenced reimbursement figure without chasing receipts.

A note on separating charging cost from reimbursement

Business mileage reimbursement is only one side of EV running costs. The other is who pays for personal charging in the first place. For employees with personal EVs under salary sacrifice, that cost is best handled through salary sacrifice charging, which lets them pay for electricity out of gross pay rather than needing a personal reimbursement claim at all. Keeping these two processes distinct, one for personal charging cost and one for business mileage, is what keeps both compliant.

Checklist for fleet managers

• Confirm which reimbursement basis applies to each vehicle category in your fleet
• Check whether you are paying the AER or an evidenced actual rate, and whether you can support that evidence
• Review whether home charging cost is captured at all today
• Build a per-driver audit trail before HMRC asks for one

Next steps

If you want a clearer view of your fleet's compliance position, book a demo and we can talk through your current mileage process.