HMRC clarifies VAT treatment for charging electric vehicles

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

The tax authority says that the standard rate of VAT applies to supplies of EV charging through charge points in public places. 

It has also explained when input tax can be recovered for charging EVs for business purposes.

HMRC says that supplies of EV charging through charge points in public places are charged at the standard rate of VAT. There is no exemption or relief that reduces the rate of VAT charged.

There is a reduced rate of VAT for supplies of small quantities of electricity, known as ‘de minimis’.

The de minimis provision only applies if the supply of electricity is all of the following: ongoing; to a person’s house or building; and 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.

This, says HMRC, 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.

In addition, these supplies 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; and you charge your electric vehicle for business purposes.

HMRC says you should work out how much of charging your EV is for business use and how much is for private use. VAT is recoverable only on the business use amount. The usual input tax rules apply.

It 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.

As a sole proprietor, HMRC says it is also possible to recover the input tax for charging your EV for business use at other places. The usual input tax rules apply.

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

For employees charging an EV (which is used for business) at home, HMRC says the VAT cannot be recovered, because 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 will need to keep a record of their business and private mileage so that the employer can work out the amounts of business use and private use for the vehicle.

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

However, you will be liable for an output tax charge on the amount for private use. This is because a ‘deemed supply’ has been made.

Alternatively, you can recover VAT on only the business element. The usual input tax rules apply.