Many readers will be familiar with the tax implications of providing fuel or mileage payments to both business owners and employees but may not have considered how such tax rules apply to the provision of the charging of electric vehicles.
In Muras Matters previously the tax benefits and implications of switching to an electric vehicle have been considered and with electric cars becoming more popular we have recently been asked about the VAT implications around the charging of electric vehicles. This week therefore we are considering these VAT concerns and also the potential benefit in kind arising from the charging of such vehicles.
VAT on the charging of electric vehicles
Businesses will already be aware that VAT can usually be reclaimed on business-related vehicle running and maintenance costs, such as repairs or off-street parking, even if VAT could not be reclaimed on the acquisition of the vehicle itself due to private usage.
However, the VAT position on the supply of electricity for charging electric vehicles has for a long time been unclear. HM Revenue & Customs (HMRC) have now provided confirmation of its policy as follows:
- Sole proprietors can recover input VAT on the business use proportion of charging their vehicle at home or anywhere else.
- Businesses cannot recover VAT on electricity used by employees to charge their electric vehicle at their home, even where there is business use.
- Businesses can recover input VAT charged on the supply of electricity for charging an employees’ electric company car at the employer’s premises. However, only VAT on the business usage element of the electricity charge can be reclaimed. Therefore, the employee would need to keep a record of their business and private mileage in order to calculate this.
Alternatively, the whole of the input VAT could be reclaimed but then the business would be liable to an output VAT charge on the private use element as a ‘deemed supply’.
HMRC have confirmed that the supply of electricity for vehicle charging through charging points in public places will be subject to the standard rate of VAT. There is no exemption or relief that reduces the rate of VAT charged as is the case for electricity provided to domestic customers.
Benefit in kind on the charging on electric vehicles
At present HMRC do not consider electricity to be a fuel for car fuel benefit purposes. However, there are still potential benefit in kind implications for charging electric vehicles depending on various factors. These include whether the car is a company car made available for private use or the employee’s own car used for business purposes and whether the charging takes place at work or the employee’s home.
For a company car made available to an employee for private use then there is currently no taxable benefit wherever the car is charged.
If an employee uses their own car for business and is allowed to recharge it at a work place charging point, then generally there is no benefit in kind, although certain conditions do apply.
A taxable benefit will however arise in the following circumstances:
- The employer pays for a charging point to be installed at the employee’s home;
- The employer provides a charge card to allow the employee unlimited use of third party charging points.
If you would like more information on the tax implications of charging electric vehicles, or other tax benefits associated with electric vehicles, please contact our Tax Director, Jenny Marks.
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