HMRC Extends EV Charger VAT Ruling: 5% vs 20% Tax Battle

HM Revenue and Customs has confirmed it will challenge the First-Tier Tribunal’s decision to reduce VAT on public electric vehicles from 20% to 5%, in a decision that has drawn fierce criticism from toll booth operators, campaigners and SME-led infrastructure businesses across the country.

The ruling, which was issued last month, follows a lawsuit filed by Charge My Street, a non-profit charging company, which successfully argued that electricity supplied by public chargers should fall below the 5% cut-off rate used for household electricity use. Judge Harriet Morgan found that applying the standard 20% rate was a “constricted construction” of the VAT Act, which considers electricity to be for domestic use as long as a single user does not use more than 1,000 kilowatt hours in one location in a given month, which is enough, in terms, to recharge a Tesla Model Y sixteen times.

The findings, revealed after accounting firm Deloitte saw the difference and worked pro bono alongside Charge My Street, gave the clearest hope in years that the long-standing gap between home and public charging costs could finally be closing. Three days of court arguments opened up on the interpretation of several words, notably “month” and “premises”, before the judge came down firmly against HMRC’s position.

The Ministry of Finance, however, has no intention of agreeing. In a statement on Tuesday, an HMRC spokesperson said: “We are appealing this case, as our position is that the standard rate of VAT applies to electricity supplied through public EV charging infrastructure.”

For drivers, the stakes are high. Those lucky enough to have a driveway pay 5% VAT when charging at home; it is estimated that 40% of UK households without off-street parking are affected by 20% of public chargers, an average of four times the average, for electric, equivalent electricity. In some cases, industry figures note, using an EV for public charging alone can cost ten times more per mile than charging at home, undermining the very economic case that government policy relies on to accelerate the switch to gasoline and diesel.

According to figures from charger mapping company Zapmap, the VAT differential currently earns the Treasury around £85m a year. That figure is expected to rise to £315m by 2030 and reach millions after that as the national EV fleet scales. Given Iran’s conflict-ridden financial situation, growing pressure to end planned fuel tax hikes, and the government’s own commitment to introducing a mileage tax on electric vehicles, ministers are apparently reluctant to commit revenue to replace the £24.5bn currently generated annually from fuel tax.

The appeal has sparked an unusually united response from an industry more often given to commercial competition than common sense.

Will Maden, director at Charge My Street, did not shy away: “Around 40% of the UK population, do not have a drive.

John Lewis, chief executive of char.gy, the appeals charity, described the appeal as “a very disappointing decision, and one that sends the wrong signal to the millions of people who rely on public charging.” Lewis confirmed that his company would pass on any cut VAT directly to customers, adding that “the government is talking about speeding up EV adoption, but it has chosen to keep a tax structure that makes public charging more expensive than it needs to be and undermines the transition.”

Tanya Sinclair, chief executive of Electric Vehicles UK, accused ministers of protecting inequality by proxy: “Drivers who don’t have off-street parking are already paying more because of where they live. HMRC is complaining about this decision and the government is choosing to protect that inequality. If you’re serious about EV adoption, you don’t fight a decision that will create the lowest cost.”

Ginny Buckley, CEO of Electrifying.com, asked for political opinion. “For a government that talks about representing ‘working people’, the decision to appeal is consistent with that,” he said. “This hits hard for those who don’t have driveways, making it more expensive for them to switch, and in some cases, that makes EVs more expensive to run on gas.”

Warren Philips, head of campaigns at FairCharge, who led the lobbying campaign, called the proposal insecure: “People who can’t charge at home are paying four times the VAT of their neighbors for the same electricity.

The court decision, for now, only binds Charge My Street. However, if HMRC’s appeal does not succeed in the Upper Tribunal, the floodgates will open: operators across the sector are understood to be preparing claims for overpaid VAT going back years, a liability that could reach hundreds of millions of pounds.

For UK SME charging operators, many of whom are small, founder-led businesses already struggling with grid connection delays, logistical issues and capital costs, the complaint represents more than a financial annoyance. In their view, it is a test of whether Whitehall is serious about the commercial foundations of a net zero transition, or content to talk about them.