Electric Vehicle Charging Points – what are the tax issues?

As use of electric vehicles rapidly expands, owners, developers and occupiers are installing more Electrical Vehicle Charging Points (EVCPs) at their properties. There are some tax incentives to encourage this, but also several tax questions still to be resolved.

Is VAT chargeable on the provision of EVCPs?

Currently there is no specific mention of the VAT treatment of supplying EVCPs within either VAT legislation or HMRC guidance, so the default position is that these are standard rated. But in some situations, a lower rate might apply.

One such situation could be where they are installed as part of a construction, conversion or refurbishment of a building where other works are zero-rated or reduced-rated. It is arguable that EVCPs are no longer something that are ‘out of the ordinary’; nor are they electrical appliances in the same category of ‘white goods’ (either of which would prevent the lower VAT rates applying). It would be helpful if HMRC were to confirm this though.

It is also possible to zero-rate a retrofit installation of certain energy saving materials in existing residential accommodation. The list of the qualifying items that can fall within this provision is currently under review and it is possible that EVCPs will be added to this.

Expensing the costs

For those property owners with taxable profits, they are able to claim 100% first year capital allowances on this expenditure. This year’s Finance Act No 2 extended this relief to 31 March 2025 (or 5 April 2025 for those paying income tax rather than corporation tax).

Can this VAT be recovered?

HMRC gave some guidance on their position in 2021, but this does not cover most situations.

If a business charges for the use of its EVCPs, these charges are subject to VAT at 20% and it can recover VAT incurred in full.

Particularly in built-up areas, we have noted a trend of hotels charging for all car parking spaces – whether or not they include EVCPs. Both supplies are standard rated for VAT. Other businesses where users may be parked for some time, like supermarkets, hospitality and leisure venues, are also increasingly seeking to charge for vehicle charging and/or car parking. To do this an increasing number of operators have outsourced vehicle charging to a provider that charges users directly. This is often done because there can be mutual benefits to the approach, with travellers searching for charging points via their app then choosing to eat at the restaurant.

However, not all users are likely to be charged and this complicates matters.

Employees

Most businesses will allow employees to charge their cars for free. In these circumstances, HMRC’s view is essentially the same as a business providing petrol and diesel to employees. Employees need to keep records of business and private use (including normal commuting the office). The business can then either:

• split the VAT incurred and recover only the business proportion in line with general overheads.
• recover all of the VAT in line with its general overheads, but then declare output tax on the private use.

HMRC have not yet commented on the EVCPs themselves, but it would make sense to treat them in the same way.

To encourage take up of electric cars, there is currently no benefit-in-kind where an employer provides EVCPs at, or near, their workplace – regardless of whether the cars are business or personal cars.

Where employees charge their own cars at home or elsewhere, businesses can pay the same 45p per mile rate tax free for the first 10,000 business miles as for petrol/diesel cars. However, unlike petrol/diesel, the employer cannot recover VAT on the fuel element of this payment.

Free use by others

HMRC currently do not make any comment about visitors to business premises.

If, for example, an audit manager is on a client site for the day and the business allows them to charge their electric vehicle while there, it seems clear that is an overhead cost of the business.

However, what about free use by customers? Currently the trend seems to be that businesses are moving away from this model with those in this area renting the car parking spaces to vehicle charging suppliers and customers then getting used to paying for this directly via an associated app. If the business then chooses to refund some of the charge (maybe if a customer spends a certain amount) that is simply a reduction in the price charged for whatever the business has sold.

But a professional firm with a few EVCPs in their office car park are not going to charge a client who asks to charge their car while they are attending a meeting. As EVCPs become more prevalent, will customers again expect them to be freely available?

One complication is that electricity is deemed to be a good for VAT purposes, so giving more than £50 of it away to a customer is technically a business gift on which VAT is due. Will HMRC really try to take this point? It might be reasonable to expect to a manufacturer to monitor how many free samples it gives to each retailer; but can a country pub really be expected to monitor whether it has provided more than £50 of free charging to every customer each year?

All the main political parties are clearly in favour of encouraging the switch to electric vehicles, and more EVCPs at workplaces, hotels, hospitality, and leisure venues are going to be an essential part of this. While some tax reliefs and policies are clear, there remains several areas where further clarity would be welcome.

For further information, please contact Adam Cutler, or your usual Crowe contact.