VAT on reimbursed business travel using an EV

What vat can be reclaimed for business miles using a personal Electric Car

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Hello

Not something I've considered before - but for a personal petrol car used for business miles, 45p can be reimbursed to an employee - and VAT can be reclaimed on the advisory fuel rate (15p for a 1.6 litre petrol car) if a receipt  is provided showing at least the vat claimed, dated pre the journey

What is the position re electric cars - advisory rate 9p per mile.  What receipt is requried (a household bill?) and if the electic is from a domestic property the vat charged would be at 5%, but presumably the company can still reclaim at 20%?  or not?

thanks

Replies (15)

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By FactChecker
20th May 2024 20:10

"for a personal petrol car used for business miles, 45p can be reimbursed to an employee - and VAT can be reclaimed on the advisory fuel rate (15p for a 1.6 litre petrol car) if a receipt is provided showing at least the vat claimed, dated pre the journey"

... just for clarity, you are talking about two quite separate things aren't you?
- EE claiming 45p/mile (first 10,000 miles pa) ... either as tax-free expense received from ER or as claim against taxable earnings via SA; and
- ER claiming VAT against petrol receipts provided by EE (for expenses claim).

I used to only operate that latter bit for business mileage in ER-provided vehicles (as per your suggestion - so long as receipts covered the total expense being claimed); but no-one ever suggested applying to your solution to the 'petrol component' of the higher amount being paid for an EE-owned car.
I guess it didn't seem worth the effort, although it seems quite sensible/logical.

Anyway, moving on to your actual question ... the only bit of which I'm sure is that the business can't claim 20% VAT against receipts showing 5% VAT!

My suspicion is the default VAT rule applies (i.e. no receipt = no claim), which may sometimes be a bigger problem than apportionment of household energy bills.
After all the supply may be from the home or from one of the lamp-posts near me or from a garage/motorway charge-bank or from the employer's own car-park/premises ... all of which have completely different charging rates (but who cares if they give you a receipt).

Maybe one of the VAT experts can enlighten us?

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Replying to FactChecker:
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By FactChecker
20th May 2024 20:30

Only just noticed that this question is about a "a *personal* Electric Car" ... so the 45p/mile (first 10,000 miles pa) is still available to the EE.

And I now understand why the question focuses solely on the ER's ability (or not) to reclaim VAT - and, if so, calculated how?
Sorry for being so slow!

BUT I've now found a very similar question from a few months ago posted on the HMRC Community Forum ... https://community.hmrc.gov.uk/customerforums/vat/e5e2e30c-ba7c-ee11-a81c...
You'll see that Jason contributed - and that both he and HMRC gave the answer to which I alluded above ... namely get the receipts or give up!

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Replying to FactChecker:
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By Paul Crowley
20th May 2024 20:55

The HMRC were just so helpful.

Genuinely never understood the need to fuel vouchers. There is no link at all. The voucher could be for any car owned by any person.
It is impossible (almost) to get fuel from a seller that is not registered for VAT. What idiot decided on those rules.

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Replying to Paul Crowley:
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By hairyfingers
20th May 2024 21:45

lol - agreed

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Replying to FactChecker:
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By hairyfingers
20th May 2024 21:45

thanks - yes that forum question is a similar question. so they are saying get a receipt - OK, agreed - yes, the rules are stupid as Paul points out below - and as it cannot be known which kilowatt was used in a car, the driver could very well have used home electric which is at 5% but they could still produce a public charge receipt and therefore 20% is valid to be claimed regardless.

I guess if only a household bill was provided it would be 5%. All a bit of a nonsense - and not really worth the effort in any case but still....

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VAT
By Jason Croke
21st May 2024 07:32
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Replying to Jason Croke:
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By hairyfingers
21st May 2024 08:09

ahh perfect - thank you, that answers it. If a sole proprietor the vat can be recovered at the rate charged (5% if at home). But if an employee, the vat cannot be reclaimed.

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Replying to Jason Croke:
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By Paul Crowley
21st May 2024 09:53

That means there is a new fuel charge that is going to be impossible to figure out.
Are employers complying with it?

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Replying to Paul Crowley:
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By FactChecker
21st May 2024 12:01

If you think that's hard to administer, try the section towards the end of the link provided by Jason (Employer EV / charged by EE / but at ER's premises):

"Your employee needs to keep a record of their business and private mileage so that you can work out the amounts of business use and private use for 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. The usual input tax rules apply."

All fully logical ... but how many ERs will be tracking that level of detail?

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Replying to FactChecker:
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By Paul Crowley
21st May 2024 14:14

That was the bit that I was referring to.
A practical night mare to achieve with easy electricity bill

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Replying to Paul Crowley:
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By Tax Dragon
21st May 2024 14:43

1. A private mile is any mile that isn't a business mile.

2. You know the business miles, because you pay for them.

1+2=3. (You do the maths.)

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Replying to Tax Dragon:
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By FactChecker
21st May 2024 15:34

To be fair, I don't think anyone was claiming the maths to be complicated ... it's just the VAT handling if you're silly/generous enough as an ER to be reimbursing an EE's EV charge costs for private mileage (as in ALL mileage as you point out) - because, quite logically, that means ER is making a deemed supply which is VATable.

The simpler solution is to restrict reimbursement to business mileage ... but not everyone is sensible.

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Replying to Tax Dragon:
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By Paul Crowley
21st May 2024 15:47

How does the bookkeeper entering a bill for the workplace charge point electricity know what VAT to claim?
That is of course assuming that it is measured and identifiable. Even worse if it is an estimated reading.
That could be a mix of company cars and employee cars all charging for free.

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Replying to Paul Crowley:
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By Tax Dragon
21st May 2024 15:57

Either the employer produces the logs or the bookkeeper doesn't claim any VAT.

I don't see an obvious "simplified expenses" type approach that could be suggested instead.

What would you suggest the rules should be?

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RLI
By lionofludesch
22nd May 2024 07:53

For heaven's sake, just get a petrol car.

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