I’ll admit that, as an accountant, I can get excited about things that normal people probably shouldn’t get excited about.
Like VAT. And, even more specifically, VAT on electric vehicle charging.
I know – I promise that, in real life, I am really exciting and not just a boring accountant. (And I know we all say that.)
But this one is genuinely (honestly!) quite interesting, because it affects a lot of people and it also gives us a really good reminder about how strange the tax system can be.
At the moment, if you charge your electric car at home, the electricity is generally subject to VAT at 5%.
But if you use a public charging point, it’s charged at 20%.
That means two people can be doing broadly the same thing – putting electricity into an electric car – but paying different rates of VAT depending on whether they have a driveway.
Which feels a little odd.
And, of course, the people most likely to need public chargers are those without off-street parking. That could mean people living in terraced houses, flats, rented homes, or city centres.
In other words, the people who may have fewer options can end up paying more tax.
There was a recent tax tribunal case where it was decided that some public EV charging should qualify for the lower 5% VAT rate.
Now, HMRC are appealing that decision so, for the moment, the position is still uncertain.
But I think there are two business lessons here.
The first is that tax is not always logical. (Some would claim it’s never logical.)
We like to think there is a neat rulebook where everything makes sense. But VAT in particular often has strange quirks. Jaffa Cakes, marshmallows, dating agencies, wigs… and now public EV chargers.
The second lesson is that small differences in tax rates can make a big difference.
A 15% VAT difference might not sound exciting. But if you run a business with electric vans, company cars, delivery vehicles or staff claiming mileage and charging costs, it can add up.
And it also shows why tax planning should not just be something you think about once a year when the accounts are being prepared.
If you’re buying vehicles, installing chargers, reimbursing staff, or changing how your fleet works, it is well worth checking the tax position before you make decisions.
Because the answer is not always obvious.
The tax system often works a bit like a motorway traffic jam – confusing, slow-moving, and with everybody convinced they should be in a different lane.
So, if you’re thinking about electric vehicles in your business, or you already have them, make sure you understand the VAT, benefit in kind, capital allowances and reimbursement rules.
A little bit of planning before you plug in could save you a lot of frustration later.
Cheers
Jon
PS I still like a good VAT case. I’m not saying Louise knew this before she married me… but she probably suspected.