HMRC to review rules for claiming VAT on charging electric vehicles

Following the publication of Revenue and Customs Brief 7 (2021), HMRC have received a number of representations from businesses regarding the limited options for reclaiming VAT on the cost of charging electric vehicles.

HMRC have now confirmed that they are to review the situation, giving further consideration to the instance where an employee is reimbursed by the employer for the actual cost of electricity used in charging an electric vehicle for business purposes, as well as how to account for VAT on any private use.

The review will focus on:

  • evidence that will be required to enable an employer to claim the related VAT, where the employer reimburses an employee for the actual cost of electricity used in charging an electric vehicle for business purposes; and
  • potential simplification measures to reduce the administrative burden of accounting for VAT on private use.

Once the review is complete, HMRC will publish guidance to confirm the updated policy – we will keep you updated on this as it occurs.

What are the current rules on claiming VAT when charging an electric vehicle for business purposes?

HMRC have recently updated section 8 of VAT Notice 700/64 (Motoring Expenses) which covers the recovery of input tax incurred by businesses regarding the charging of electric cars.

VAT liability of charging an electric vehicle

  • The supply of electric vehicle charging via a charging point in a public place is subject to VAT at the standard (20%) rate.
  • The reduced (5%) rate of VAT only applies to ongoing supplies of electricity to a person’s house or building which is less than 1,000 kilowatt-hours a month.

If you are a sole proprietor, or partner in a partnership business, the VAT incurred on charging an electric vehicle can be recovered if you:

  • charge your electric vehicle at home or elsewhere
  • charge your electric vehicle for business purposes

The rate of VAT incurred will vary according to whether you were at home or not.

Employees are currently able to claim back VAT for charging an electric vehicle in the following instances:

  • where an employee’s electric car (whether it is a company vehicle or not) is charged at a public charging point
  • where employees charge an employer’s electric vehicle used for both business and private purposes at the employer’s premises

In both instances, the employee must keep records of their business/private mileage to determine the proportion of business use for their vehicle.

Where an employee charges an electric vehicle at home, whether this is a company vehicle or not, the overall supply of electricity is made to the employee and not the employer, and therefore the VAT cannot be reclaimed.

Get in touch

The review of these complicated VAT regulations on the charging of electric vehicles is welcomed – we will keep you updated on the outcome when published by HMRC. If you have any questions regarding reclaiming VAT on electric vehicle charging, get in touch by speaking to your usual adviser, or by emailing enquiries@pmm.co.uk.

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