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HMRC Clarify VAT on Electric Vehicle Charging Points

by | Jun 23, 2021 | All Articles, Finance | 0 comments

Over two thirds of current EV registrations are for businesses or fleets. With Government grants available to help offset the cost of purchasing EVs for business, as well as savings on every journey undertaken, it is little wonder that more and more business owners are switching to EVs.

A business or fleet in the UK switching to electric vans or cars can save an estimated 20-30% in upkeep and repair costs alone compared with petrol or diesel vehicles.

This is just one of the reasons the demand for public charging points and their use for charging for business purposes is rapidly rising.

With the addition of electric vehicles still relatively new to most fleets HMRC have been asked to clarify the rate of VAT charged on these supplies as well as the circumstances in which input tax can be recovered.

What is HMRCs policy concerning VAT rates when charging electric vehicles in public places?

Well put simply-supplies of electricity through charging points in public places are set at the standard rate of VAT. There is no exemption or relief that reduces the rate of VAT charged.

What is the ‘de minimis provision’ and when does it apply?

The ‘de minimis provision’ allows for a reduced rate of VAT for supplies of small quantities of electricity.

This applies if the supply is ongoing, to a person’s house or building and less than 1,000 kilowatt hours a month.

It does not count for electric supplies provided from public charging points as they are not to a person’s house or building and are not usually an ongoing supply to one individual-therefore making it difficult to calculate the rate of supply.

So as a business how can this benefit you?

If you are a sole proprietor, charge your electric vehicle at home and you charge your vehicle for business purposes you can recover the input tax.

In order to do this you will need to keep a record of how much you are charging your electric vehicle for business use and how much is for private use as you can recover VAT on the business portion only.

Sole proprietors can also recover the input tax for charging your electric vehicle for business use at other places.

The usual input tax rules apply.

The rate for recovery of input tax for charging electric vehicles is the same as the VAT rate charged on the supply of electricity.

Does the same apply for employees who charge an electric vehicle at home?

I’m afraid not. Even if the vehicle is used for business use you cannot recover the VAT if the vehicle is charged from home. The reason being in this situation the supply is made to the employee and not to the business itself.

What if the employee charges an employer’s electric vehicle at the employer’s premises?

Well that’s a tongue twister!

Even if the vehicle is used by the employee for both business and private use you can claim the full amount of VAT for the supply of electricity used from this charging point.

The employee must however keep a separate record for both their business and private mileage as you will be liable for an output tax charge on the amount for private use.

The second option is to claim the VAT solely for the business portion in which situation the usual input tax rules will apply.

How can you maximise these benefits for your fleet?

Not only is there a huge benefit of convenience in investing in EV charging points both at your business premises and home but it could also be a long term financial benefit.

By maximising the use of these charging points you could avoid paying the VAT which would apply when using public points. If you add up all those savings for your entire EV fleet that could be a nice little saving!

Not only this but you are also able to utilise this saving for your employee vehicles too which is a benefit you’re also passing on to them.

You can read the HMRC article here.

If your business is looking to make the switch for your fleet to electric vehicles, please feel free to contact us with any questions / concerns you might have by using the form below – or ask us in the comments section at the bottom of this page.

Find out more about switching to EV

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