VAT charged at 20% on public chargers?
Discussion
...vs the 5% people pay for the same power when they charge at home.
I've actually argued in favour of the government allowing unregulated prices to charge on public chargers, for the simple reason that they cost a lot to install and no one is going to bother if they fear regulation may suddenly limit what they can charge - at least until they recoup the capital costs of installing them in the first place. So I think I'm being pretty realistic about the commercial aspects of getting a strong public charging infrastructure in place.
But it just struck me... why on earth are the government compounding the cost issue by charging the full VAT rate on electricity for those that have to use public chargers!? If the goal is to get the chargers installed and get people into EV's, then it seems a no brainer to cut the VAT rate in support of that ambition. And the killer is that with the high prices charged per kw by the charger networks, if the government dropped the current 20% VAT down to the same 5% VAT they charge for domestic power, they would still be making receiving the same revenue per kw as they do for those that charge at home.
Am I missing something or going mad? This seems like the sort of change the treasury could so easily make with an immediate benefit, and realistically only a minimal revenue drop, because relatively few motorists actually need to use the chargers frequently. And then down the line, as they start to regulate limits for what can be charged by the networks and as electricity prices continue to come back to sensible levels, they can step the VAT back up to compensate.
By way of example:
- A typical EV tariff provides home charging at 7ppkwh, for each kwh the account holder pays about one third of a penny in VAT.
- A typical public rapid charger costs on average 70ppkwh, which at the higher VAT rate includes 12p per kwh in VAT.
36x more VAT per kwh
I've actually argued in favour of the government allowing unregulated prices to charge on public chargers, for the simple reason that they cost a lot to install and no one is going to bother if they fear regulation may suddenly limit what they can charge - at least until they recoup the capital costs of installing them in the first place. So I think I'm being pretty realistic about the commercial aspects of getting a strong public charging infrastructure in place.
But it just struck me... why on earth are the government compounding the cost issue by charging the full VAT rate on electricity for those that have to use public chargers!? If the goal is to get the chargers installed and get people into EV's, then it seems a no brainer to cut the VAT rate in support of that ambition. And the killer is that with the high prices charged per kw by the charger networks, if the government dropped the current 20% VAT down to the same 5% VAT they charge for domestic power, they would still be making receiving the same revenue per kw as they do for those that charge at home.
Am I missing something or going mad? This seems like the sort of change the treasury could so easily make with an immediate benefit, and realistically only a minimal revenue drop, because relatively few motorists actually need to use the chargers frequently. And then down the line, as they start to regulate limits for what can be charged by the networks and as electricity prices continue to come back to sensible levels, they can step the VAT back up to compensate.
By way of example:
- A typical EV tariff provides home charging at 7ppkwh, for each kwh the account holder pays about one third of a penny in VAT.
- A typical public rapid charger costs on average 70ppkwh, which at the higher VAT rate includes 12p per kwh in VAT.
36x more VAT per kwh
This is from April 2024, and I don't think anything is going to change with the new govt, given the dire state of public finances ->
On the issue of public charging costs, the Govenment said: “VAT is a broad-based tax on consumption and the 20% standard rate applies to most goods and services. Whilst there are exceptions to the standard rate, these have always been limited by both legal and fiscal considerations.
Expanding the VAT relief already available would impose additional pressure on the public finances to which VAT makes a significant contribution."
https://www.zemo.org.uk/news-events/news,governmen...
On the issue of public charging costs, the Govenment said: “VAT is a broad-based tax on consumption and the 20% standard rate applies to most goods and services. Whilst there are exceptions to the standard rate, these have always been limited by both legal and fiscal considerations.
Expanding the VAT relief already available would impose additional pressure on the public finances to which VAT makes a significant contribution."
https://www.zemo.org.uk/news-events/news,governmen...
I am getting into an EV for reasons. The cost per Kw was not a deciding factor and I can’t have a special tariff at home for EV charging. I just accept that the cost of charging/fuel it is what it is.
If cost was a consideration then I would look at my user profile and buy accordingly. The 7ppKW/h for me it’s always going to be a shortlisted thing and it wouldn’t weight on my decision. As it happens I can’t have that rate anyway so I just accept the cost. Charging at home is always going to be cheaper. Some get much more benefit with their home tariffs than me but it’s ok.
If cost was a consideration then I would look at my user profile and buy accordingly. The 7ppKW/h for me it’s always going to be a shortlisted thing and it wouldn’t weight on my decision. As it happens I can’t have that rate anyway so I just accept the cost. Charging at home is always going to be cheaper. Some get much more benefit with their home tariffs than me but it’s ok.
TheDeuce said:
But it just struck me... why on earth are the government compounding the cost issue by charging the full VAT rate on electricity for those that have to use public chargers!? If the goal is to get the chargers installed and get people into EV's, then it seems a no brainer to cut the VAT rate in support of that ambition. And the killer is that with the high prices charged per kw by the charger networks, if the government dropped the current 20% VAT down to the same 5% VAT they charge for domestic power, they would still be making receiving the same revenue per kw as they do for those that charge at home.
Am I missing something or going mad? This seems like the sort of change the treasury could so easily make with an immediate benefit, and realistically only a minimal revenue drop, because relatively few motorists actually need to use the chargers frequently. And then down the line, as they start to regulate limits for what can be charged by the networks and as electricity prices continue to come back to sensible levels, they can step the VAT back up to compensate.
Two issues are at play.Am I missing something or going mad? This seems like the sort of change the treasury could so easily make with an immediate benefit, and realistically only a minimal revenue drop, because relatively few motorists actually need to use the chargers frequently. And then down the line, as they start to regulate limits for what can be charged by the networks and as electricity prices continue to come back to sensible levels, they can step the VAT back up to compensate.
When commercial EV chargers started to roll out the UK was part of the EU and the UK couldn't unilaterally make a change to allow a reduced rate of VAT on electricity supplied through EV chargers as it didn't meet the qualifications that the EU set on things that could benefit from a reduced rate.
Obviously now the UK government could make that change, but they would need to see a reason to do that.
On many things where VAT was removed or reduced the benefit of that change didn't make its way to the consumer, but simply increased profits for the retailer who was now charging no or less VAT. Did you notice the price of electronic books on Amazon fall when they became zero rated, or the price of digital newspaper subscriptions, etc. etc.
And is there an incentive for EV charger operators to pass that tax reduction on? There is currently a vast difference in the price the various operators charge, with no seeming link between the cost and what is being provided, so it is almost certain that prices wouldn't change if the tax was removed.
That means life sucks for those who can't charge their EVs at home - and mainly that means taxing those with less money who can't afford a house with a parking space more than the wealthier who can afford a house with a drive where they can charge at home and only pay 5% VAT - or actually £0 VAT for me as most of my EV charging is free thanks to Octopus and the overabundance of wind farms off the coast of eastern England.
Will that last forever - undoubtably not. Currently the UK government receives £25 billion a year in tax on fuel duty plus another £15 billion on the VAT on the fuel, so £40 billion a year that will eventually be lost as people move over to EVs, and it is hard to think that the government will just shrug and go 'ah well' rather than finding another way to get that £40 billion from drivers.
TheRainMaker said:
You wait till they put 58p duty on top and then add the 20% tax 
They need to recover the loss somehow.
I agree it is not fair, though.
I Imagine the electricity used by home car chargers will be subject to separate pricing to the rest of the house at some point.They need to recover the loss somehow.
I agree it is not fair, though.
Once EVs are commonplace why would anyone complain that their car costs £60 to "fill" at home just as their previous ICE car did?
Phateuk said:
TheRainMaker said:
You wait till they put 58p duty on top and then add the 20% tax
They need to recover the loss somehow.
I agree it is not fair, though.
I Imagine the electricity used by home car chargers will be subject to separate pricing to the rest of the house at some point.They need to recover the loss somehow.
I agree it is not fair, though.
Once EVs are commonplace why would anyone complain that their car costs £60 to "fill" at home just as their previous ICE car did?
Already there is European legislation that mandates all cars have a black box sufficient toake road charging work.. and we get the same spec cars here.
TheDeuce said:
Phateuk said:
TheRainMaker said:
You wait till they put 58p duty on top and then add the 20% tax
They need to recover the loss somehow.
I agree it is not fair, though.
I Imagine the electricity used by home car chargers will be subject to separate pricing to the rest of the house at some point.They need to recover the loss somehow.
I agree it is not fair, though.
Once EVs are commonplace why would anyone complain that their car costs £60 to "fill" at home just as their previous ICE car did?
Already there is European legislation that mandates all cars have a black box sufficient toake road charging work.. and we get the same spec cars here.
Phateuk said:
TheDeuce said:
Phateuk said:
TheRainMaker said:
You wait till they put 58p duty on top and then add the 20% tax
They need to recover the loss somehow.
I agree it is not fair, though.
I Imagine the electricity used by home car chargers will be subject to separate pricing to the rest of the house at some point.They need to recover the loss somehow.
I agree it is not fair, though.
Once EVs are commonplace why would anyone complain that their car costs £60 to "fill" at home just as their previous ICE car did?
Already there is European legislation that mandates all cars have a black box sufficient toake road charging work.. and we get the same spec cars here.
They can set a base rate per vehicle based on its lifetime emissions profile and multiply that by miles driven etc. they can also set higher rates for congested roads at peak times etc etc - it makes sense.
People will hate it, but it does make sense.
Olivera said:
I would suggest the problem is the inverse, that is the current significant undertaxation of home EV charging in relation to the ICE tax take (VAT and fuel duty).
That's not so much a problem as a happy situation which supports the governments desire to get people out of ICE and into electric cars.It will be a temporary situation, but as above I think road charging is more likely than developing hardware and legislation to ensure EV charging at home is correctly monitored and taxed. They already have the road charging hardware in the cars... And it covers all bases of vehicle use tax, not just fuel.
I still find it incredible that instead of asking "Why the f
k do I pay so much tax based purely on how I get around?" people ask "But how will I still pay once I'm not doing the thing (emissions) that is used to justify it?".
If tax on powering a Playstation or heating a hot tub or leaving every damn light in the house on is 5%, why should it be any more for charging a car to get to work?
Set it to zero percent for up to a modest level of domestic consumption, then ramp it up in tiers from there. Give a discount based on the carbon intensity of the supplier. Job done, no unfairness.
k do I pay so much tax based purely on how I get around?" people ask "But how will I still pay once I'm not doing the thing (emissions) that is used to justify it?". If tax on powering a Playstation or heating a hot tub or leaving every damn light in the house on is 5%, why should it be any more for charging a car to get to work?
Set it to zero percent for up to a modest level of domestic consumption, then ramp it up in tiers from there. Give a discount based on the carbon intensity of the supplier. Job done, no unfairness.
TheDeuce said:
I think things are moving towards road charging - not popular but actually fairer than a blanket rate applied to 'fuel'. Pay for what you use of the roads based on what you choose to drive.
Not only *what* you drive, but likely far more importantly *where* and *when* you drive.Rural areas vs urban. Peak vs off-peak. Etc.
SpidersWeb said:
TheDeuce said:
I think things are moving towards road charging - not popular but actually fairer than a blanket rate applied to 'fuel'. Pay for what you use of the roads based on what you choose to drive.
Not only *what* you drive, but likely far more importantly *where* and *when* you drive.Rural areas vs urban. Peak vs off-peak. Etc.
otolith said:
I still find it incredible that instead of asking "Why the fk do I pay so much tax based purely on how I get around?" people ask "But how will I still pay once I'm not doing the thing (emissions) that is used to justify it?".
If tax on powering a Playstation or heating a hot tub or leaving every damn light in the house on is 5%, why should it be any more for charging a car to get to work?
Set it to zero percent for up to a modest level of domestic consumption, then ramp it up in tiers from there. Give a discount based on the carbon intensity of the supplier. Job done, no unfairness.
Lets be honest current tax on fuel isn't for enviorental reasons, there is no reason why a car just because its an EV should pay less. They car stiil use the roads, still cause traffic, generating electric still creates emissions ... simply drop all forms of fuel duty regardless of type of fuel and just put it on pence per mile, that way everyone pays fairly. Cover 20,000 miles and you pay your fare share.k do I pay so much tax based purely on how I get around?" people ask "But how will I still pay once I'm not doing the thing (emissions) that is used to justify it?". If tax on powering a Playstation or heating a hot tub or leaving every damn light in the house on is 5%, why should it be any more for charging a car to get to work?
Set it to zero percent for up to a modest level of domestic consumption, then ramp it up in tiers from there. Give a discount based on the carbon intensity of the supplier. Job done, no unfairness.
stevemcs said:
Lets be honest current tax on fuel isn't for enviorental reasons, there is no reason why a car just because its an EV should pay less. They car stiil use the roads, still cause traffic, generating electric still creates emissions ... simply drop all forms of fuel duty regardless of type of fuel and just put it on pence per mile, that way everyone pays fairly. Cover 20,000 miles and you pay your fare share.
Or put it on buses. Or trains. Or shoe leather. Or stop basing how much tax a person pays on how they travel and put it on income or luxury goods or carbon. otolith said:
SpidersWeb said:
TheDeuce said:
I think things are moving towards road charging - not popular but actually fairer than a blanket rate applied to 'fuel'. Pay for what you use of the roads based on what you choose to drive.
Not only *what* you drive, but likely far more importantly *where* and *when* you drive.Rural areas vs urban. Peak vs off-peak. Etc.
Plainly people will see it as big brother watching, but the government chiefly want the tax revenue and general usage data - they'll probably sacrifice the more annoying ways the data could be used for the sake of getting the policy implemented without starting a revolt and losing the subsequent election!
If you're really interested, it's likely that another european country will implement such a scheme ahead of us - so that will be interesting to see how it goes and no doubt our government will be happy to let a neighbour go first and learn observe the problems they run into - both logistically and politically.
stevemcs said:
otolith said:
I still find it incredible that instead of asking "Why the fk do I pay so much tax based purely on how I get around?" people ask "But how will I still pay once I'm not doing the thing (emissions) that is used to justify it?".
If tax on powering a Playstation or heating a hot tub or leaving every damn light in the house on is 5%, why should it be any more for charging a car to get to work?
Set it to zero percent for up to a modest level of domestic consumption, then ramp it up in tiers from there. Give a discount based on the carbon intensity of the supplier. Job done, no unfairness.
Let’s be honest current tax on fuel isn't for enviorental reasons, there is no reason why a car just because its an EV should pay less. They car stiil use the roads, still cause traffic, generating electric still creates emissions ... simply drop all forms of fuel duty regardless of type of fuel and just put it on pence per mile, that way everyone pays fairly. Cover 20,000 miles and you pay your fare share.k do I pay so much tax based purely on how I get around?" people ask "But how will I still pay once I'm not doing the thing (emissions) that is used to justify it?". If tax on powering a Playstation or heating a hot tub or leaving every damn light in the house on is 5%, why should it be any more for charging a car to get to work?
Set it to zero percent for up to a modest level of domestic consumption, then ramp it up in tiers from there. Give a discount based on the carbon intensity of the supplier. Job done, no unfairness.
Diderot said:
stevemcs said:
otolith said:
I still find it incredible that instead of asking "Why the fk do I pay so much tax based purely on how I get around?" people ask "But how will I still pay once I'm not doing the thing (emissions) that is used to justify it?".
If tax on powering a Playstation or heating a hot tub or leaving every damn light in the house on is 5%, why should it be any more for charging a car to get to work?
Set it to zero percent for up to a modest level of domestic consumption, then ramp it up in tiers from there. Give a discount based on the carbon intensity of the supplier. Job done, no unfairness.
Let’s be honest current tax on fuel isn't for enviorental reasons, there is no reason why a car just because its an EV should pay less. They car stiil use the roads, still cause traffic, generating electric still creates emissions ... simply drop all forms of fuel duty regardless of type of fuel and just put it on pence per mile, that way everyone pays fairly. Cover 20,000 miles and you pay your fare share.k do I pay so much tax based purely on how I get around?" people ask "But how will I still pay once I'm not doing the thing (emissions) that is used to justify it?". If tax on powering a Playstation or heating a hot tub or leaving every damn light in the house on is 5%, why should it be any more for charging a car to get to work?
Set it to zero percent for up to a modest level of domestic consumption, then ramp it up in tiers from there. Give a discount based on the carbon intensity of the supplier. Job done, no unfairness.
Tax is pretty simple really. You work out how much you need as revenue, and then work out how to split that between different groups of people to influence their behaviour.
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