HMRC has clarified the VAT treatment of the supply of electricity for electric cars in a recent brief, outlining when input tax can be recovered when charging for business purposes.
The update clarifies that the standard rate of VAT applies to the supply of electric vehicle charging through charging points in public places. There is no exemption or relief that reduces the rate of VAT charged,
Recovering input tax for charging electric vehicles
You can recover the input tax for charging your electric vehicle if all of the following apply: -
You are as sole proprietor;
You charge your electric vehicle at home;
You charge your electric vehicle for business purposes.
You should work out how much of the charging your vehicle is for business use and how much is for private use. You can recover the VAT on the business use element, and the usual input tax rules apply.
As a sole proprietor, you can recover the input tax for charging your electric vehicle for business use at other places. Again, the usual input tax rules apply.
The rate for recovery of input tax for charging electric vehicles is the same as the VAT rate charged on the supply of electricity.
Employees charge an electric vehicle (which is used for business) at home
You cannot recover the VAT. This is because the supply is made to the employee and not to the business.
Employees charge an employer's electric vehicle (for both business and private use) at the employer's premises
Your employee needs to keep a record of their business and private mileage so that you can work out the amount of business use and private use of the vehicle.
You can recover the full amount of VAT for the supply of electricity used to charge the electric vehicle, this includes the electricity for private use. However, you will be liable for an output tax charge on the amount for private use. This is because a "deemed supply" has been made. Alternatively, you can recover VAT on only the business element. As before, the usual input tax rules apply.
For VAT purposes, a partnership itself must incur the the VAT for it to be recoverable.