VAT and Electric Vehicles

You cannot usually recover the VAT on the purchase of a car but is a common misconception that VAT is recoverable on the purchase of electric cars due to some environmental reason. However, there is no difference in the treatment for VAT purposes between electric cars and cars which run on petrol or diesel.

Can any VAT be recovered on electric vehicle business use?

VAT incurred on repairs and maintenance for an electric car used for business purposes, can be all be reclaimed as input tax providing the business pays for the work. It does not matter if the car is also used for private motoring.

This also applies to maintenance provided by a leasing company, provided that the maintenance services are optional and clearly separate from the lease itself.

Can you reclaim the VAT on electric car charging costs?

You cannot reclaim the VAT on the cost of charging your electric car for private use and should calculate how much of the cost of charging your electric vehicle is for business use and how much is for private use by keeping mileage records.

If an employee charges an electric car (whether this is a company vehicle or not) at a public charging point, the supply of electricity is made to the business which can recover the VAT on the cost of charging the electric car, subject to the normal rules but where an employee charges an electric car (whether this is a company vehicle or not) at home, the overall supply of electricity is made to the employee and not the employer.

The employer is not, therefore, able to recover the VAT on the cost of charging the electric car.

HMRC is considering the situation where an employee is reimbursed by the employer for the actual cost of electricity used in charging an electric vehicle for business purposes to determine what evidence can be practicably provided, to allow the employer to claim the related VAT, subject to the normal rules.

Important: HMRC policy on VAT on public EV charging

Revenue & Customs Brief 7 (2021) sets out HMRC’s policy concerning the VAT treatment of charging electric vehicles at charging points in public spaces.

It is the view of HMRC that supplies of electric vehicle charging through charging points in public places are charged at the standard rate of VAT.

The Brief sets out HMRC’s reasons that they believe the reduced rate of VAT for de minimis supplies of electricity does not apply. However, VAT law does not reflect this and there is a strong argument that the VAT rate applied to electricity supplied through public charging points qualifies for the reduced rate of 5%. Watch this space!