Stockport accountancy firm Hallidays have partnered with VAT specialists and fellow Xeinadin Group company, Centurion VAT, to explain the VAT treatment for businesses charging electric vehicles.
As more Electric Vehicles (EV) arrive on UK roads then the need to access charging infrastructure increases, whether through public access facilities or at employer’s premises. The question arises as to what the VAT treatment of both the income generated from the charging points as well as the Input VAT recovery position is of such costs incurred by businesses and their employees. Guidance from HMRC has arrived on the matter: Revenue and Customs Brief 7 (2021): VAT liability of charging of electric vehicles – GOV.UK (www.gov.uk)
The short answer on the VAT treatment of EV charging income is that it is standard rated – so 20% VAT is due under the current rules. HMRC do not see that there can be a reduced VAT rate applied as whilst there is a “de minimis” rules on electricity supplies that only applies if all of the following are met:
The supply of electricity is:
- to a person’s house or building
- less than 1000 kilowatt hours a month
As supplies from charging points in public places are not to a person’s house or building nor part of an ongoing supply to one person, where the rate of supply can be calculated, then the reduced VAT rate cannot apply.
In respect of recovering the VAT incurred on recharging costs whether at home or at public charging points the guidance outlines that if you are a sole proprietor, you could recover VAT on costs incurred at home as long as you can evidence the business use element of the vehicle. A sole proprietor can also recover the VAT for the business use element when charging at public charge points.
Home charging – No VAT recovery as the supply of electricity is to the employee and not the business
Employee’s charging an employer’s EV at the employer’s premises
Employee needs to keep a record of the business use of the vehicle and then the business will have a choice between:
- recovering ONLY the business element of the VAT on the electricity supplied OR
- recovering ALL the VAT on the electricity supply AND accounting for Output Tax on the private use element
Mileage Expense Claims
The mileage rate used for business expense claims for an EV is listed as 4 p per mile and the usual VAT invoice evidence rules will apply: Motoring expenses (VAT Notice 700/64) – GOV.UK (www.gov.uk) – which would cover input tax recovery options for public access charging points.
Always a VAT aspect to address we find – retention of VAT receipts is an issue for lots of larger organisations and the challenge will now be whether the cost of maintaining compliance with VAT rules matches the level of VAT recovery as use of EV grows across the UK. Many organisations already forego VAT recovery on mileage expenses particularly if they operate in a partially exempt area.