HMRC has issued Revenue and Customs Brief 7 (2021) to explain its policy concerning the VAT treatment on the cost of charging of electric vehicles when using charging points situated in various public places.

It states that the standard rate of VAT applies to supplies of electric vehicle charging through charging points in public places and explains when input tax can be recovered for charging electric vehicles for business purposes.

There has been some discussion as to whether the supplies of electricity for vehicle charging might be subject to the de minimis rules. HMRC’s view is that this is not the case. It states that the de minimis provision only applies if the supply of electricity is:

• 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 electric vehicle charging at charging points in public places. 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. In addition, these supplies are not usually an ongoing supply to one person where the rate of supply can be calculated.

However, the law states that the electricity supply can be to any premises and does not mention that it must be “ongoing”.

Recovering input tax for charging electric vehicles

Taxpayers can recover the input tax for charging their electric vehicle if:

• they are a sole proprietor,
• they charge their electric vehicle at home, and
• they charge their electric vehicle for business purposes.

Taxpayers should work out what proportion of the cost of charging the electric vehicle is for business use and how much is for private use. VAT can only be recovered on the business use amount. The usual input tax rules apply.

Sole proprietors can recover the input tax for charging their electric vehicle for business use at other places. The usual input tax rules apply.

The rate for recovering input tax when charging electric vehicles is the same as the VAT rate charged on the supply of electricity. This could be VAT at 5% or 20%, depending upon the nature of the premises where the vehicle was charged.

Employees charge an electric vehicle (which is used for business) at home

Employers cannot recover the VAT for charging an electric vehicle at an employees home. This is because the supply is made to the employee and not to the business.

ICAEW members may recall that a similar issue arose in relation to input tax recovery of the fuel element of mileage claims following a European Court of Justice decision in 2005. This resulted in a requirement for the employer to hold a VAT invoice to cover the reimbursement to the employee with effect from 1 January 2006.

Due to the apparent inconsistency of input tax treatment between petrol, diesel and electricity being purchased by employees for business use of motor vehicles, we are querying this latest position taken by HMRC. This also appears to act against the incentives of the general move towards vehicles powered by electricity, rather than fossil fuels.

Employees charge an employer’s electric vehicle (for business and private use) at the employer’s premises

Employees need to keep a record of their business and private mileage so their employers can work out the amounts of business use and private use for the vehicle.

Employers can recover the full amount of VAT for the supply of electricity used to charge the electric vehicle. This includes the electricity for private use. However, employers will be liable for an output tax charge on the amount for private use. This is because a “deemed supply”’ has been made. Alternatively, VAT can be recovered on only the business element. The usual input tax rules apply.

• Read Revenue and Customs Brief 7 (2021).