VAT on charging electric cars?

VAT on charging electric cars? How do you account for VAT when you charge your electric company car?

HMRC have recently published new guidelines on its policy for the VAT treatment of charging electric cars (Brief 7(2021))

VAT Position for providing the electricity

The supply of electric vehicle charging via a charging point in a public place is subject to VAT at the standard rate (20%)

The reduced rate of VAT (5%) will be used if all of the following conditions exist:

The supply of electricity is at the person’s house or building
It is an ongoing supply
Less than 1000 kilowatt-hours a month

Employees

Your business cannot reclaim any input VAT when charging the electric car at home regardless of how much relates to business. This is because the supply is made to the employee and not the business.

If you charge your company electric car at the employer’s premises then it appears you have a choice:

You can reclaim the input VAT only on the business element only, or
You can reclaim all the input VAT on the private and business element, however, you will have to account for standard-rate output VAT on the amount for private use

Your employee needs to keep a record of their business and private mileage so that you can work out the amounts of business and private use for the vehicle.

Sole traders

If you are a sole trader it appears you can reclaim VAT paid on electricity for charging your car etc. at home or at a public charging point to the extent the electric vehicle is used for your business. Where the cost cannot be specifically identified as relating to business or private travel, you must make a fair and reasonable estimate and reclaim only the business element.

Before you account for VAT for charging an electric company car read HMRC’s guidelines (maybe several times!) and then take some professional advice.