VAT on Purchase
There is no difference in treatment for VAT purposes between electric cars or those with hybrid or traditional fuel technologies.! It is a misconception that VAT is recoverable on the purchase of electric car. Rules to claim VAT on Purchase of car remain the same – you may be able to reclaim all the VAT on a new car if you use it ONLY FOR BUSINESS Reclaiming VAT: Vehicles and fuel costs - GOV.UK (www.gov.uk)
VAT on Fuel Costs
There are different ways of reclaiming VAT on fuel if you do not pay a fixed rate under the Flat Rate Scheme.
You can reclaim all the VAT on fuel if your vehicle is used ONLY FOR BUSINESS.
There are 3 ways of handling VAT if you use the vehicle for both business and private purposes. You can:
· reclaim all the VAT and pay the right fuel scale charges for your vehicle Work out your VAT fuel scale charge - GOV.UK (www.gov.uk)
· only reclaim the VAT on fuel you use for business trips - you’ll have to keep detailed mileage records
· choose not to reclaim any VAT, (if your business mileage is so low that the fuel scale charge would be higher than the VAT you can reclaim)
Did you know you can claim back VAT on 45p / 25p mileage expenses?
As a business, you can reclaim the VAT on your mileage expenses if you’re paying your employees a mileage allowance for using their own vehicle for work. You will only be able to claim VAT on the fuel portion of the mileage claim.
For calculation of fuel portion of a business trip, one can use a simple method by using HMRC published Advisory Fuel Rates Advisory fuel rates - GOV.UK (www.gov.uk) The rates are published by HMRC to cover the amount which a company can pay tax free to the person who drives company car for business purposes and pays the money from his own pocket towards fuel cost.
VAT on mileage = (Advisory fuel rate x business miles claimed)/6
The advisory electricity rate for fully electric cars is 4 pence per mile. The difficulty comes in calculating the correct amount of VAT to extract, as this will be dependent on the location at which the car is charged. If charged at business premises - VAT is claimed as part of Electricity bill, If charged at charging point in a public place a VAT fraction of 1/6 (20%) i.e. normal input tax rule apply for commercial use. However, if the car is charged at home, then a fraction of 1/21 (5%) for domestic use would be used. A sole trader may recover VAT paid on charging their vehicle at home for business purposes, but must apportion their electricity bill between business and private use, point to watch is VAT rate paid on domestic electricity supply.
The advisory fuel rate table does confirm that hybrid cars are treated as either petrol or diesel cars for this purpose
You must keep a record of fuel receipts/documents to claim VAT on mileage expenses. If fuel receipts/documents are not available with you, HMRC may trash the claim you are opting for
VAT on other costs
You can usually reclaim the VAT for all business-related running and maintenance costs, such as repairs or off-street parking and any accessories you’ve fitted for business use