VAT Rules for Charging Electric Vehicles
In an earlier blog article we looked into the tax incentives for businesses providing fully electric or plug-in hybrid company cars.
These include hugely reduced Benefit-in-Kind (BIK) rates and enhanced capital allowances for cars with zero or low emission rates. The government also provides financial support towards the up-front costs of the purchase and installation of Electric Vehicle (EV) charge points via the Workplace Charging Scheme (WCS).
However, a further issue that businesses and employees should be aware of when purchasing EVs is VAT liability.
Cars, whether electric or not, can be eligible for a VAT reclaim if they meet certain conditions. You can reclaim the input VAT on a new car if you use it exclusively for business. If it is used personally, which includes journeys between home and the workplace, you cannot reclaim the VAT. If a company car is leased, hired or purchased through HP or PCP arrangements you can recover 50% of the VAT. All maintenance costs and repairs are eligible for VAT reclaims, as is the cost of running the car itself.
Recently HMRC has clarified its position on the VAT treatment of charging EVs in public places. It makes clear that VAT is always charged at standard rate (20%) at charging points in public places, including charging points at employers’ workplaces.
VAT can however be recovered for business use. But it is important that you keep detailed mileage records to show how much vehicle charge is used for business use or private use. For employees charging an EV at home, HMRC says the VAT cannot be recovered because the supply is made to the employee and not to the business. So businesses cannot reclaim VAT on electricity used by an employee to recharge a vehicle at home, even when the charging is for business journeys.
In summary, there are still financial as well as environmental incentives for your business and your employees to make the switch to EVs. However, but you should bear in mind the added complexities around VAT. Provided detailed and accurate records of business mileage are kept, VAT liability and recovery shouldn’t be a problem.
If you are at all unsure about what can be reclaimed and what can’t, we would recommend you check with us, just to be sure.