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What's the tax treatment for electric vehicle charging points?

27th May 2022
Brought to you by
tax cloud

Tax Cloud is an R&D Tax Credits claim portal.

Share this content

Following COP26 last November, the pressure is on to tackle climate change and reduce CO2 emissions.

With the cost of petrol and diesel soaring, electric vehicles are growing hugely in popularity, bringing about massive demand for electric charging points. Workplaces and businesses in particular are adding them to their car parks in large numbers - but what are the tax consequences of this?

Corporation Tax

If a company invests in one or more EV charging points, it can claim 100% relief on the cost of installation under the ‘first year allowances’ rules. Alternatively, it will qualify for the new super-deduction of 130% which was announced in the Summer 2021 Budget.

VAT

HMRC guidance has recently been updated about the VAT treatment of electric vehicle charging points. Here’s a quick summary:

Liability relating to charging

Where an EV charging point is in a public place to be used by the public, the standard VAT rate of 20% will apply (not the reduced 5% rate).

This only applies where the supply of electricity is ongoing to somebody’s house for example, or any other building that is less than 1,000 kilowatt-hours per month.

VAT recovery for directors and employees

If you're a company employee (or a director) and you charge an electric vehicle, which you also use for business at your home, you’re not able to claim VAT. The reason is because the supply of electricity is being made to the individual not the business.

If you’re charging a company electric vehicle that is be used for both private and business purposes - and the charging occurs at your business premises - it’s essential you maintain records of both the private and business mileage. This will then allow you to calculate what proportion of your mileage is actually used for business purposes.

When it comes to reclaiming the VAT, there’s a couple of options. Either you can reclaim the entire amount of VAT charged on the electricity supply used to charge the vehicle (which will include any private use). However you will have to include a charge on the VAT return for the private use.

As an alternative, you may just decide to reclaim the VAT on the business element.

EV charging points and installation costs

As much as 100% of the installation costs of an EV charging point can potentially be reclaimed by your business. This can include not just the installation of the charging point itself but also any changes that need to be made to the land in order for the charging point to be put in.

Some of the expenditure may also attract the new 130% enhanced super deduction of the whole cost. This formed part of the last Chancellor's Budget.

The deduction will only be applied on new, unused electric vehicle charging points. It doesn’t include anything purchased second hand.

VAT recovery for sole traders

If you’re a sole trader and charge your electric vehicle at home for business use, you can also reclaim the VAT. However, this only applies to mileage completed for business.

Sole traders are also able to claim any VAT incurred charging your electric vehicle for business use at public places. This could be a service station or a park for instance. The VAT is claimed at the same rate that it is charged on the electricity supply, so either 5% or 20%.

What about employee use? What is the tax treatment of electric vehicle charging points in this case?

Where someone is provided with workplace facilities for charging an electric vehicle no taxable benefit in kind arises on the cost of providing electricity at these facilities. This remains the case as long as the exemption covers the employer's cost of providing these facilities, the cost of electricity and any other related services.

These additional conditions must also be met:

The charging facilities either at or very close to the employee’s workplace. The exemption does not apply if the charging point is at the employee’s home.

Either all employees of the business, or all at one location, are able to access the charging point if they wish to.

If the EV charging facilities are offered as part of a flexible remuneration package, there will be a taxable benefit in kind. Furthermore, charging facilities must be for a vehicle in which the employee is either the driver or a passenger.

One last point…

The exemption isn’t applicable to the payment or reimbursement of an employee’s personal costs if they charge their vehicle away from their work premises. For instance, it does not apply where the employer reimburses the costs of charging their vehicle at a motorway service station.

Having said that, if the cost of the electricity is reimbursed for charging the vehicle away from the employer’s premises - and the vehicle is used for business – a mileage allowance may be claimable.

Finally, any electricity or connected services provided by an employer for a company car or van is classed as a benefit in kind and is therefore exempt.

This article was brought to you by Tax Cloud

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