HMRC has confirmed its new method for calculating advisory electric rates (AER) for people who drive electric company vehicles.

As of December 2022, HMRC calculates AER quarterly using Office for National Statistics (ONS) energy figures and electrical energy consumption values for each vehicle model.

Previously, the rates were reviewed annually and based primarily on data from the Department for Business, Energy and Industry Strategy (BEIS). While HMRC still draws from these figures, the new methodology uses a wider dataset.

AERs are the Government's recommended rates to assist businesses in reimbursing the costs of company cars used for business purposes - equivalent to the advisory fuel rates (AFRs) for petrol and diesel vehicles.

The new calculation method combined with soaring energy costs means business owners are likely to pay more generous benefits-in-kind to employees using electric company cars.

However, while the fleet industry welcomed the move to quarterly reviews, many industry professionals believe the current eight pence per mile rate is insufficient for some drivers.

Paul Hollick, chairman of the Association of Fleet Professionals, said:

"We effectively asked for four rates, one for cars that have access to home charging, a rate for cars without, then a rate for vans with home charging, and a rate for vans without. We continue to push that agenda."

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