HMRC clarifies VAT for charging electric vehicles

The tax policy concerning the VAT treatment of the charging of electric vehicles (EVs) via public charge points and at home has been clarified by HM Revenue and Customs (HMRC).

After requests for clarity from businesses around reduced rates due to the level of electricity being supplied, it has confirmed that the VAT on public electric vehicle charging stands at 20%,.

HMRC explained that de minimis, a mechanism that allows a 5% VAT rate for supplies of small quantities of electricity, does not apply to public EV charging, and that there is therefore no relief or exemption to the standard VAT rate of 20%. The de minimis provision only applies if the supply of electricity meets all of the following requirements:

• It is ongoing

• To a person’s house or building

• Less than 1,000 kilowatt hours a month

The de minimis provision does not apply to supplies of EV charging at charge points in public places.

HMRC states this is because these supplies are made at various places such as car parks, petrol stations, and on-street parking, not to a person’s house or building, and are not usually an ongoing supply to one person where the rate of supply can be calculated.

HMRC says that it is possible to recover the input tax for charging an EV if all of the following apply:

• You are a sole proprietor

• You charge your electric vehicle at home

• You charge your electric vehicle for business purposes

This means businesses cannot reclaim VAT on electricity used by an employee to recharge a vehicle at home, even when the charging is for business journeys.

However, HMRC’s policy on petrol/diesel is to allow VAT recovery when an employee fills up their car and is reimbursed by their employer.

For employees charging an EV which is used for business at home, HMRC says the VAT cannot be recovered as the supply is made to the employee and not to the business.

For employees charging an employer’s EV for both business and private use at the employer’s premises, the employee must keep a record of their business and private mileage so that the employer can work out the amounts of business use and private use.

HMRC says it is possible to recover the full amount of VAT for the supply of electricity used to charge the EV, including the electricity for private use.

However, because a ‘deemed supply’ has been made you will be liable for an output tax charge on the amount for private use or you can recover VAT on only the business element with the usual input tax rules applying.