What is the Advisory Electric Rate (AER)?

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The Advisory Electric Rate (AER) is a pence per-mile reimbursement rate set by the government, which currently sits at 5p per mile.

Employers can use the Advisory Electric Rate as a way of reimbursing their employees’ EV charging costs for business miles.

The AER which is revised quarterly, was originally set at 4p upon its inception in 2018 and has been at 5ppm since November 2021.

The major issue with the AER as a flat rate, is that it doesn’t reflect the real-world cost of running an EV. Here’s a great example as to why…

Businesses will typically have employees charging at home, all with different energy suppliers and tariff rates. One employee (driver A) could have a fixed rate at 17p per kWh, another (driver B) could be on a variable tariff and could be paying as high as 29p per kWh. If they both drive the same vehicle, in this scenario let’s say it’s a Vauxhall Vivaro-E which has a vehicle efficiency of 2.44 miles per kWh. Driver A’s true pence per mile would be 7ppm, and driver B’d would be much higher at 11.9ppm. Both of which are significantly over the advisory 5ppm.

If reimbursed the 5ppm, driver A would be short changed approximately £391 and driver B a staggering £1372 based on an annual consumption of 20,000 over a year period.

Of course businesses can pay above the AER, but in order to do so they must provide HMRC with evidence of each charge including location, duration and the kWh otherwise both the employee and employer will have BIK tax to pay on the difference.

With a fleet of just 2 vehicles, you can see how much admin time this would take for a business to get right, can you imagine how complex it would be with more vehicles?!

Luckily though, there is a solution and that’s Mina.

Accurate payments are made direct to each driver's home energy supplier for the cost of charging their company EV at home, and because we’re HMRC approved, no BIK tax is needed. Drivers’ tariff and energy suppliers are monitored to ensure the accurate amount is always paid. The businesses then receive just one monthly invoice which covers their entire fleet’s charges.

You must be able to show HMRC that you are just paying the real cost of the energy and nothing more, or you risk paying Benefit-in-Kind tax on the reimbursement or even having an inspection by the taxman.