VAT liability on the cost of charging Electric Vehicles
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.
Recovering input tax for charging electric vehicles
Taxpayers can recover the input tax for charging their electric vehicle if:
- 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. 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 employee's home. This is because the supply is made to the employee and not to the business.
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.