The business runs some electric vehicles (EVs) but there has been little thought about where these are charged.
The business runs some electric vehicles (EVs) but there has been little thought about where these are charged.
So, what are HMRC’s rules on this, what are the tax implications and what is the best approach?
Tax status HMRC recently confirmed it is trying to introduce practical measures that will ensure your business can claim a fair and reasonable amount of input tax, the VAT added to the price when goods or services are purchased – on the cost of charging electric vehicles (EVs) . Good news. The good news is that there is no problem if you or your employees charge either company vehicles or personal cars at your business premises or a public charging point.
But. You will need to apportion your input tax claim to reflect any private use of the vehicle, or account for output tax instead. However, you cannot claim input tax if you pay your employees a mileage rate for using their own EVs. This is different to other types of road fuel where input tax can be claimed if fuel receipts are submitted with the employee’s claim.
Tip. To support your VAT claims with charging at your business premises, mileage records will need to be kept for each vehicle, to show the split between business and private travel. Tip. If your employees pay for the charging costs of EVs , you can pay them a special advisory fuel rate of 5p per mile. But no input tax can be claimed on these payments. 5% or 20% VAT? There are some situations when a 5% VAT rate applies to electricity costs, e.g. domestic, de minimis and charity non-business use. HMRC confirmed that the VAT rate charged at public charging points should be 20%. Even though there was an argument that it should only be 5%, based on the de minimis rules. Public charging points include car parks, service stations, supermarkets, etc.
Tip. Always check whether the charge is 5% or 20% VAT, so that the correct input tax can be claimed. Home charging Business owners, i.e. sole traders and partners, can claim input tax on the cost of charging their EVs at home. Assuming business use etc. The rules are different for employees. The HMRC Brief notes that employees charging an EV (which is used for business) at home “cannot recover the VAT. This is because the supply is made to the employee and not to the business”
Tip. The VAT solution is to insist that employees only charge their vehicles at the business premises or a public charging point. See : VAT ON ELECTRIC CHARGING Any traps? If the input tax on the costs of charging company or employee-owned EVs is claimed, HMRC might seek to assess output tax. HMRC can use the scale charge system that is used for petrol and diesel vehicles if there is any private use of the vehicles in question. If the claim hasn’t been apportioned. The output tax payment with the scale charge exceeds the input tax that has been claimed. Tip. To avoid issues with HMRC, an option is to not claim any input tax on the cost of charging EVs. This will avoid a potential scale charge problem. Read more here about Workplace charging for all-electric and plug-in hybrid vehicles.