A recent tribunal ruling may help close one of the most contentious gaps in EV charging policy. Giles Salmond, Tax Disputes Partner at Stewarts, and Guy Bud, Senior Associate Barrister at Stewarts, examine what happens next.
The law has struggled to keep up with the rapid expansion of electric vehicle (EV) infrastructure. The First-Tier Tribunal in Charge My Street Ltd v HMRC released on 26 February touches on the important issue of VAT charged on electricity supplied through public charging points, something that has caused considerable uncertainty for years.
The standard rate of VAT in the UK is, of course, 20%. Some supplies, however, can be charged at the “reduced rate” of 5%, which represents a significant saving where the transaction falls within one of the kinds set out in the relevant schedule of the Value Added Tax Act 1994.
HMRC’s position has always been that the legislation creates a discrepancy between different kinds of EV charging. A person benefits from the reduced rate if they use electricity for home charging. If they use an on-street charging point, however, HMRC’s position has been that “recharging of electric vehicles using public charging points is always standard-rated because supplies are made at various places and not to a person’s house or building”.
Most of Charge My Street Ltd’s (CMS) customers are EV owners who do not have access to off-street parking needed for home charging. It sought to challenge a ruling requested from HMRC, which held that its supplies of electricity to drivers were standard-rated, and appealed to the First-Tier Tribunal.
Supplies “to a person at any premises”
One of the key issues in contention before the tribunal was whether electricity provided by CMS’s public charging points was provided “to a person at any premises”. The taxpayer argued that “any premises” was wide enough to capture the kinds of public places in which its charging points were installed, such as car parks.
The tribunal agreed with the taxpayer’s arguments. In so doing, it rejected a number of counterarguments about how the legislation should be interpreted.
It found that the “plain meaning” was simply that “electricity is supplied to an identified person at identified premises”, which simply meant “any identifiable property”.
“Rate”
A second issue was whether electricity provided by CMS was “provided at a rate [not] exceeding 1000 kilowatt hours a month”. The wording of this provision is rather ambiguous. The taxpayer argued that this simply required that the amount of electricity supplied to an individual at any single charging point in a month did not exceed 1,000 kWh, which determined the “rate”.
In support of the latter argument, the taxpayer also sought to rely on the principle of fiscal neutrality, which holds that supplies that are identical or sufficiently similar from the perspective of a consumer should be taxed in the same way by reference to the reduced rate available for charging at home.
The tribunal again found that the taxpayer’s analysis aligned entirely with the “plain natural meaning” of the legislation.
Identity of the consumer
One further issue that arose was whether all supplies were made by CMS to drivers. Although no objections arose where drivers paid in the normal manner, HMRC argued that the position was different where drivers used Fuuse, a software platform for managing EV chargers, and third-party apps, which allow users to navigate between different providers’ charging infrastructure.
Examining the Fuuse arrangements, the tribunal found that the “economic and commercial reality” was that it was CMS supplying charging services to the driver. The contractual documentation that did not align with this could therefore be disregarded.
This was not the case for the third-party apps, which the tribunal found were indeed acting as principals or commission agents. It emphasised that the third-party apps had scope to make a profit under the pricing arrangements and plainly had an “economic role” in them. The fact that they did not own any of the charging infrastructure did not prevent them from relying on CMS to fulfil their contractual obligations.
What it means
The tribunal’s decision is an important one for the on-street charging industry. It appears to address the VAT disparity between different kinds of EV charging, which has always seemed unfair in principle. Reduced rate treatment will be welcomed by motorists.
The decision will need careful consideration, especially in relation to its implications for other businesses and third-party charging apps. For this latter group, it may be necessary to fundamentally rework their contractual arrangements and may even affect their business model.
It is also not the end of the story. Given its impact on longstanding policies, HMRC has unsurprisingly already lodged an appeal against the decision which will be heard by the Upper Tribunal, likely over the course of next year. Some clarification would certainly be welcome. The First-Tier Tribunal’s interpretation elides the words “premises” and “property”, which seems potentially contentious and raises a number of further questions about whether all on-street charging would in principle be covered. It may take a bit longer, and ideally more legislative clarity, to confirm the position.
