Recovery of VAT on Electric car charging

The government are committed to encouraging more and more people to drive electric cars and have reduced or eliminated the income tax benefits of providing electric company cars or charging points for employees. Since 6 April 2019 there has been no taxable benefit for employees where they use an electric charging point at their place of work, provided the facility is available to all staff. But what are the VAT implications of the supply of electricity and what if public charging points are used?

HMRC have issued Revenue and Customs Brief 7 (2021) which explains HMRC’s policy concerning the VAT treatment of charging of electric vehicles when using charging points situated in various public places.

The brief clarifies that supplies of electric vehicle charging through charging points in public places are charged at the standard rate of VAT. It also explains when input tax can be recovered for charging electric vehicles for business purposes.

The HMRC brief confirms that input tax can be recovered on electricity used to fuel a car intended for business use where:

• The charging takes place at the business premises of the VAT-registered business
• The charging is at the home of a sole proprietor

VAT cannot be recovered where the charging is at the home of an employee as the supply is then not made to the company.

Where employees charge an employer’s electric vehicle (for both business and private use) at the employer’s premises the employee needs 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.

It is hoped that a simpler system can be found such as a scale charge similar to that used for the supply of fuel for private use.

See: Revenue and Customs Brief 7 (2021): VAT liability of charging of electric vehicles -https://www.gov.uk/government/publications/revenue-and-customs-brief-7-2021-vat-liability-of-charging-of-electric-vehicles/

26th March 2021 – Hillmans Weekly Update

Below I have summarised all the main tax related updates we have seen this week.

• Pay 2019/20 Self-Assessment Tax Before 1 April 2021 To Avoid 5% Surcharge Penalty
• Grants for Electric Car Buyers Cut
• Bounce Back Loan Application Deadline 31st March 2021
• VAT Deferral – Apply Now to Spread your Payments
• Additional Restrictions Grant

If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.

I hope you have a good weekend.

Stay safe and well.

Cheers,

Steve

Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100

Grants for Electric Car Buyers Cut

2020 was a game changer year for the arrival of fully ’Battery Electric Vehicles’  (BEVs) in the UK new vehicle market, with 108,205 BEVs registered in 2020, with 200,000 BEVs expected to be registered in 2021, including a game changer year for the arrival of electric commercial vehicles/vans.

By 2030, sales of new cars and vans powered wholly by diesel and petrol will be banned in the UK, with Hybrid vehicles to follow 5 years later so between now and then, most new vehicles launched will be offered with some form of electrification, accelerating demand for electric charge points across the UK, to meet the needs of small to medium enterprises.

Within the business user vehicle market, the government introduced significant  ‘Benefit-in-Kind’ (B-I-K) incentives for BEVs, effective from year 2020/2021, with just a 1% B-I-K tax liability for financial year 2021/22 and 2% in 2022/23 and frozen at 2% for 2023/24 and 2024/25.

In February 2021, the government also announced a £50 million extension of the home and workplace grants for installing charger points with the workplace charging scheme being open to small to medium enterprises, for the first time, which includes funding for the accommodation sector such and B&Bs, to provide a boost to rural areas, in places like the South West.

Last week, in a development that was unexpected and seen within the automotive industry as ‘un-helpful’, the government announced that with immediate effect, the current government vehicle Plug-In Grant was being reduced from £3,000 to £2,500 and at the same time, the list price of vehicles, including vans, that qualify for the government grant, was being reduced from £50,000 to £35,000.

In essence, the government are trying to focus on more of the grants going towards lower priced volume models, that appeal to private buyers, as well as company car drivers and remove the incentive for much more expensive models, that are typically only purchased by company executives, who still are able to enjoy the significant Benefit in Kind tax incentives that are in place.

It is thought that the government are also looking to put the emphasis on car manufacturers reducing the list price of their  electric vehicles, to make them more affordable to the masses, with Citroen, for example, responding to last week’s announcement, by announcing the list price reduction on their electric model, to below the qualifying grant limit of £35,000.

Blog Article Written By: 
Leon Wilce - Fleet Specialist Consultant
Westcar Consulting
leon@west-car.co.uk