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HMRC have recently released a new brief which discusses HMRC’s policy on the VAT treatment of charging electric vehicles and an entitlement to recover VAT on the cost of charging.
VAT Treatment of Electric Vehicle Charging in Public Places
Businesses have sought clarification from HMRC with respect to the correct VAT treatment of supplies of electric vehicle charges via charging points in public places. HMRC have now confirmed that the standard rate of VAT applies to such supplies.
The 5% reduced rate for supplies of small quantities (de-minimis) of electricity is not applicable to the supply of electric vehicle charging. The de-minimis applies where the supply of electricity is on-going and to a person’s house/building. As the electricity is supplied to a public place, the conditions for de-minimis no longer apply.
Entitlement to Recover Input Tax – Sole Traders
HMRC have confirmed in what cases input tax recovery is allowed. They have said that where the vehicle is charged for business purposes, such as sole traders charging their electric vehicle at home, the input tax can be recovered, provided they make an apportionment between electricity used for private use and business purposes.
HMRC have also confirmed that sole traders incurring VAT on charging their electric vehicle in public places are entitled to recover the input tax, subject to the normal rules for recovery.
Entitlement to Recover Input Tax – Employees
In their brief, HMRC have also confirmed that employees charging an electric vehicle that is used for businesses, at home, is unable to recover the VAT on the basis that the supply is made to the employee not the business.
Where employees may charge their vehicle (used for both business and private use) at their employers premises, then the business will be able to recover the full amount of VAT incurred on the supply of electricity. However, there will be a deemed supply and the business is required to account for output tax on the element of private use.
It is therefore advised that records are kept of the business and private mileage, so businesses can recover the VAT solely in relation to the business element.