Why EVs Broke Business Mileage Reimbursement

Business mileage reimbursement was built for petrol and diesel cars. One receipt, one pump price, one simple rate per mile. Electric cars break every part of that model, and most fleets are still running the old process on top of a completely different fuel.

Here is why it no longer works, and what fleet and finance teams need to change.

The old model assumed one price for fuel

Petrol mileage rates work because fuel is bought in one place, at one advertised price, with a receipt every time. HMRC's Advisory Fuel Rates simply reflect the average pump price and typical fuel economy.

Electricity does not behave like that. An employee charging an EV might pay:

Nothing, if charging at home on a fixed-rate tariff already covered by their bill
A few pence per kWh, on a smart overnight tariff
20 to 45p per kWh at a public rapid or ultra-rapid charger
A workplace rate set by the employer, often free

Four different prices for the same fuel, often in the same week, and no receipt for the cheapest and most common one: charging at home overnight.

HMRC's answer does not fully solve it

HMRC publishes an Advisory Electricity Rate (AER) for company car business mileage, currently a flat pence-per-mile figure. It is simple, but it is also a blunt instrument. It assumes an average efficiency and an average electricity cost, so it consistently under-pays efficient drivers who charge mostly at home and over-pays drivers who rely on expensive public rapid charging.

Fleets that pay a flat rate on top of a company car scheme are either overpaying on average, or quietly under-reimbursing the drivers who charge in public because they have no home charger. That second group tends to be the roughly nine million UK households without off-street parking, so the shortfall lands disproportionately on drivers who already have the hardest time charging.

The evidence problem

Even where a fleet wants to reimburse actual cost rather than a flat rate, it needs evidence. Home charging usually has no separate meter, so there is no invoice to check against. Public charging spreads across dozens of networks and apps, each with its own receipt format, if a receipt exists at all. Finance teams end up either accepting mileage claims on trust or asking drivers to keep screenshots, which nobody does consistently.

The compliance risk this creates

None of this is just an inconvenience. If reimbursement rates do not reflect real cost, HMRC can treat the excess as taxable earnings, creating a PAYE and National Insurance liability for both employer and employee. Get it wrong at scale across a fleet and the exposure is not trivial.

What a fixed process looks like

The way through this is to separate two things that fleets often bundle together:

Paying for charging itself, which for personal EVs is best handled through salary sacrifice charging, so the employee pays for electricity out of gross pay rather than claiming it back.
Reimbursing business mileage, which needs to reflect actual charging cost across home, work and public charging, calculated per driver rather than as one flat number.

That second job is what our Reimburse product does: it captures home, workplace and public charging cost automatically and produces an HMRC-compliant reimbursement figure per driver, with the evidence trail to support it.

What fleet and finance teams should check now

Do we know what proportion of our EV drivers charge mainly at home versus in public?
Is our current mileage rate based on an assumption, or on actual charging cost?
Could we produce evidence for a mileage claim if HMRC asked for it tomorrow?
Are drivers without home chargers being fairly reimbursed, or quietly losing out?

If the honest answer to any of those is "we're not sure," it is worth a proper look at how reimbursement is calculated before it becomes a bigger problem at fleet renewal or audit time.