The UK’s ambitious pathway to a greener future, underscored by its commitment to cease sales of new petrol and diesel vehicles by 2030, is facing significant obstacles.
The pressing issue at the forefront of this transition is the ‘pavement tax’ – a 20% VAT imposed on public EV charging, starkly contrasting the mere 5% VAT on domestic electricity.
A Cry for Fairness
The group spearheading the crusade against this discrepancy is FairCharge. Led by its founder, Quentin Willson, the campaign advocates for equal VAT rates on public and home EV charging. Their primary argument is that the current tax regime disproportionately affects those unable to charge their electric vehicles at home, pushing them towards paying higher rates and thus obstructing the mass adoption of electric vehicles.
The ‘Pavement Tax’ Dilemma
The ‘pavement tax’, as it is colloquially known, essentially raises the cost of charging an electric vehicle in public spaces, thereby penalizing those without access to private parking or driveways. According to FairCharge, this tax impacts over a third of the population who don’t have the luxury of charging their EVs at home.
The Cost Disparity
Recent research further highlights the disparity in cost between home and public EV charging. Certain regions face VAT charges up to 90% higher at public charging stations than at home. This discrepancy further burdens those without off-street parking and hampers the growth of the EV market.
The Call for Reform
In light of these challenges, FairCharge, supported by 44 UK MPs, penned an open letter to Chancellor Jeremy Hunt, urging him to level the VAT rates for public EV charging with home charging in the Spring Budget, he rejected these calls. The letter details the current VAT rate discrepancies and the resulting inequalities.
HMRC’s Stand on the Issue
In 2021, HM Revenue and Customs (HMRC) affirmed the VAT on public EV charging would remain at 20%. They justified this by explaining that the de minimis rule, which allows a 5% VAT rate for small quantities of electricity, does not apply to public EV charging, and there is therefore no relief from the standard 20% VAT rate.
The Impact on the EV Market
The higher VAT rates on public charging not only impact drivers but also threaten the growth of the UK’s EV industry. FairCharge warns that the tax could hinder the UK’s progress towards electrification, particularly in comparison to the US and the European Union, which are rapidly advancing in this sector.
A Call to Action
In response to these challenges, FairCharge has developed a six-point action plan to accelerate the ‘electric car revolution’. The plan includes calls for a strong Zero Emission Vehicle (ZEV) mandate to boost investment, increased funding for EV charging points, and support schemes for low-income drivers to access EVs.
The Effect on Households
The open letter from FairCharge and the UK MPs highlights that 38% of UK households do not have access to private parking where they could charge an EV at home. This statistic underscores the necessity for a more equitable tax system to ensure that the transition to electric vehicles is inclusive and accessible to all.
The Potential Savings
The FairCharge campaign has garnered support from various quarters, including Char.gy, a leading provider of EV charging solutions. Their Head of Marketing, Shayne Rees, highlighted that a fair VAT pricing could save a private motorist driving 7,000 miles per year up to £160, depending on when they charged their EV.
The UK’s electrification journey faces a significant hurdle in the form of the ‘pavement tax’. The government’s commitment to cease the sale of new petrol and diesel vehicles by 2030 is not enough. It is necessary to create an environment that encourages and facilitates the adoption of electric vehicles. The call to reduce VAT on non-home charging is a step towards creating such an environment.
The Jeremy Hunt VAT petition reflects the public’s demand for a fairer tax system to help the UK transition to a greener future.