Electric vehicle business drivers are being left out of pocket by hundreds of pounds a year when relying on official government reimbursement rates.

Paua Reimburse helps fleets fairly compensate employees for the actual costs on charging their vehicle for business use

New analysis from Paua finds that electric vehicle drivers could be undercompensated by £1,000 a year or more in some cases when reimbursed using just the Government’s advisory electric rate (AER).

The AER for fully electric cars currently stands at 7 pence per mile, after dropping from 8ppm as of 1 September.

But Paua, which offers EV charging and payment reimbursement services for businesses, says the problem with the AER is that it massively undercompensates drivers as soon as they leave their home driveway, as shown by its new Paua Reimburse calculator.

A driver doing as little as 20% of their charging in public can be faced with a gap of £200 or more for their annual cost to drive business miles. Higher-mileage drivers and those who charge away from home are most affected.

A Polestar 2 driver doing 6,000 business miles a year, charging mainly in public stands to be out of pocket by £800 every year. And a Jaguar I-Pace doing 10,000 miles for business all in public stands to be out of pocket by more than £2,000.

Some businesses chose to address this with an additional payment to the driver. This additional payment needs to be ‘grossed up’ to be compliant. This means adding extra PAYE tax and income tax to the amount, which is an extra hassle for the business. Businesses that do not do this are not compliant and risk HMRC penalties of tens of thousands of pounds.

Or a business can choose to just pay for the charging. However, with no record of what business miles the driver does this is a Benefit-in-Kind and without recording it as such the business is again not tax compliant.

To address this, Paua has developed Paua Reimburse, a tool to ensure accurate, HMRC-compliant reimbursement for business miles.

Paua Reimburse captures the charging costs for home and public and splits the business and personal usage to help businesses fairly compensate their employees for the amount they actually spent on charging their vehicle for business use.

The data collected ensures that Paua can calculate a bespoke rate for the driver for their claim period.

Niall Riddell, CEO at Paua, said: “Paua makes it simple for business to properly compensate employees and be compliant with HMRC.”

Paua is encouraging drivers to check their reimbursement status by visiting www.paua.com and using the calculator to review their position with their employer.

Riddell went on: “Businesses are pushing drivers to adopt electric vehicles but without the right compensation mechanisms in place they risk underpaying their drivers for the business miles they complete. This can leave them in a sticky situation.”