Charging Points: VAT

Treasury written question – answered on 19th May 2022.

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Photo of Zarah Sultana Zarah Sultana Labour, Coventry South

To ask the Chancellor of the Exchequer, what assessment his Department has made of the (a) potential impact of the higher rate of VAT charged on public electric vehicle charging compared with home charging on the uptake of electric vehicles and (b) potential distributional impact of that differential on households by income bracket.

Photo of Lucy Frazer Lucy Frazer The Financial Secretary to the Treasury

In order to keep costs down for families, the supply of electricity for domestic use, including charging an electric vehicle (EV) at home, attracts the 5 per cent reduced rate of VAT. However, electricity supplied at EV charging points in public places is subject to the 20 per cent standard rate of VAT.

The Government has not specifically introduced a reduced rate for charging EVs at home. However, the practical challenges of differentiating between the electricity used at home for general domestic purposes and electricity used to charge EVs currently mean that the reduced rate is effectively being applied to EV charging at home.

Harmonising the rate of VAT on electricity for public and domestic charging points for electric vehicles would require the Government to expand the existing VAT relief on electricity for domestic use (that is also used to charge EVs at home) to electricity for use at public EV charge points, and this would come at a cost.

VAT makes a significant contribution towards the public finances, raising around £130 billion in 2019-20, and helps fund the Government's priorities including the NHS, schools, and defence. Any loss in tax revenue would have to be balanced by a reduction in public spending, increased borrowing, or increased taxation elsewhere.

The Government is committed to supporting the transition to zero emission vehicles to help the UK meet its net-zero obligations. The Government has committed £2.5 billion since 2020 to support the transition to zero emission vehicles, which funds targeted vehicle grants and the rollout of charging infrastructure.

There are currently no plans to change the VAT treatment of electricity supplied at public EV charge points. However, the Government keeps all taxes under review, and carefully considers behavioural effects and distributional impacts when making decisions on tax policy.

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