Claiming VAT on Electric Cars

As the UK pushes towards a more eco-friendly future, a growing number of businesses are considering electric vehicles (EVs) for their fleets. However, the question of VAT on electric cars often arises, particularly about the potential tax benefits. In this guide, we’ll explore the ins and outs of claiming VAT on electric cars and provide you with the essential information to navigate this evolving landscape.

Understanding VAT on Electric Cars

Contrary to popular belief, electric cars are subject to the same VAT rules as their petrol and diesel counterparts. The standard VAT rate of 20% applies to the purchase of all vehicle types. This means that when you’re considering if you can claim VAT on electric cars, the answer isn’t as straightforward as you might hope.

Can You Claim VAT on Electric Cars?

The question of whether you can claim VAT on electric cars is a complex one. Generally, businesses cannot reclaim VAT on the purchase of cars, regardless of their fuel type. However, there are some exceptions and nuances to consider:

• Business-only use: If the electric car is used exclusively for business purposes with no private use whatsoever, you may be able to reclaim the VAT.
• Pool cars: Vehicles used as pool cars, meaning that they are shared by employees for business trips, may also be eligible for VAT reclaim.
• Charging costs: While you may not be able to claim VAT on the car itself, there are opportunities to reclaim VAT on charging costs.

It’s important to note that these rules apply equally to electric and conventional vehicles. The environmental benefits of EVs do not result in any special VAT treatment.

VAT on Electric Car Charging

While the rules for claiming VAT on electric car purchases mirror those of conventional vehicles, there have been recent developments regarding VAT on charging costs. HMRC has updated its guidance on this matter, meaning that businesses can now recover VAT incurred when charging electric vehicles for business use. This applies whether the vehicles are charged at work or at public charging points. This change simplifies what was previously a complex area of VAT reclamation.

However, it’s crucial to maintain accurate records of business versus personal use. If an employee charges their company electric car at home, the business can only reclaim the VAT on the portion used for business purposes. 

Recent Legislative Changes

The landscape of electric vehicle taxation is evolving rapidly. Recent updates to VAT Notice 700/64 (Motoring Expenses) by HMRC have provided more clarity on the recovery of input tax for electric vehicle charging. 

These changes reflect the government’s recognition of the growing importance of electric vehicles in the business world. While the core VAT rules remain unchanged, these updates provide businesses with clearer guidelines for managing their EV-related expenses.

The Future of VAT on Electric Cars

As the UK continues its push towards net-zero emissions, it’s possible that we’ll see further changes to the VAT treatment of electric vehicles. While current rules treat EVs the same as conventional vehicles, there’s ongoing discussion about potential incentives to encourage EV adoption.

However, despite the ongoing discussions between industry and HMRC regarding the differential in VAT rates between home charging (5%) and public charging (20%) of vehicles, FleetNews has reported that a VAT cut on public chargers has been ruled out by the government. These debates highlight the complexity of the issue and the uncertainty surrounding future changes.

Practical Tips for Businesses

If you’re considering integrating electric vehicles into your business fleet, here are some practical tips to help you navigate VAT claims:

• Keep meticulous records: Maintain detailed logs of business versus personal use for all electric vehicles.
• Utilise fleet management tools: Consider using WEX’s advanced fleet management solutions to accurately track vehicle usage and streamline your VAT reclaim process.
• Separate charging costs: Where possible, use separate charging accounts for business and personal use to simplify VAT reclaims.
• Stay informed: Keep abreast of legislative changes as the EV landscape continues to evolve.

Conclusion

While the current VAT rules for electric cars largely mirror those of conventional vehicles, the landscape is evolving. Businesses can claim VAT on electric car charging for business use, but the rules around purchasing and leasing remain largely unchanged.

As you navigate this complex area, consider leveraging WEX’s fleet management solutions, which can help you manage and track your fleet’s fuel and charging expenses efficiently. By staying informed and maintaining accurate records, you can ensure you’re maximising your VAT reclaims while staying compliant with current regulations.

Remember, the journey towards a greener fleet is as much about understanding the financial implications as it is about reducing emissions. With the right knowledge and tools, you can make informed decisions that benefit both your business and the environment.