12th January 2022

At the end of May 2021, HMRC issued its Revenue and Customs Brief 7 detailing the policy pertaining to reclaiming VAT for the cost of charging electric vehicles for business purposes.

Now, following objections from businesses and business representatives on its restrictive nature, HMRC has announced (6 January 2022) that they are undertaking a review into the policy.

Further information on the guidance around who can reclaim the VAT has also been updated.

The situation under review is where an employee is reimbursed by the employer for the actual cost of electricity used in charging an electric vehicle for business purposes.

The review will look at:

  • what evidence can be provided, to allow the employer to claim the related VAT, subject to the normal rules; and
  • other simplification measures that may reduce administrative burdens in terms of accounting for VAT on private use.

UNW’s VAT Partner, Mark Hetherington, said: ‘Thankfully HMRC appear to have grasped the nettle here, because last year’s policy announcement was clearly at odds with the evidence required to support input tax claims for petrol and diesel purchased by employees (but used for a business purpose), particularly after the environmental pledges given at the COP26 summit, and if the policy had been maintained would have acted as a dis-incentive for VAT registered businesses running electric cars.’

Amended guidance will be published once the review is complete.

If you would like more information on this topic, please do not hesitate to contact one of our dedicated VAT specialists: Mark Hetherington, VAT Partner, on 0191 243 6073 or at markhetherington@unw.co.uk; or Ian Coulthard, VAT Senior Manager, on 0191 243 6017 or at iancoulthard@unw.co.uk.

What is the background? HMRC undertake reviews to ensure employers are complying with their tax and National Insurance (NI) obligations.

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