Today’s Blog came about following some research I was doing on the relative costs of an EV and I came upon a report of a recent Tax Tribunal that was highly relevant.
This case concerned a public charging point operator (Charge My Street Limited aka CMS) who was charging VAT to its customers at the reduced rate of 5% on its electric-vehicle charging services, despite HMRC’s guidance to the contrary. But first a bit of background on EV’s.
SOME BACKGROUND ON EV’S
In the UK, electric vehicles (EVs) and plug-in hybrids (PHEVs) together accounted for 35% of new car registrations in 2026 to date, with over 1.85 million fully electric cars currently on the road.
On average, a normal EV consumes roughly 200–400 kWh per month, assuming an average driver traveling about 1,000 miles (1,600 km). This equals around 15–20 kWh per 100 kilometres or roughly 3–4 miles per kWh. Consumption will of course be affected by driving efficiency and the weather, in particular how cold it is, with a typical reduction in an EV’s range by up to 30%, in a period of sub-zero temperatures.
CHARGING COSTS
Home EV charging in the UK generally costs between 7p and 31p per kWh. The average standard rate is approximately 24.5p–26p/kWh, but dedicated EV tariffs offer cheap overnight rates in the range of around 7p–10p/kWh, making a full charge costing £4–£5 on off-peak rates, compared to £15+ on standard rates.
Public charging costs in the UK typically range from 50p to over 80p per kWh, depending on the speed of the charger. Standard so-called fast chargers cost around 51-57p/kWh, whilst ultra-fast chargers typically cost 75-85p/kWh.
Charging your EV or PHEV at home will mean that you will be on your domestic electric supply, with a VAT rate of 5%. Commercial charging stations normally charge 20% VAY which brings me neatly to the recent Tax Tribunal (FTT) case of HMRC v Charge My Street Limited (CMS).
HMRC CHANGED THEIR MIND
CMS operate public charging points and had originally submitted its VAT returns on the basis that its supplies were standard rated at 20%. However, following advice from its accountants, in September 2023 it submitted amended returns, with the output tax at the reduced rate of 5%. HMRC initially made the repayment but then had a change of heart and demanded the refund back and so to court they went.
The dispute centred on the interpretation of the notes to Sch 7A Group of the 1994 VAT Act. This allows a supply of fuel/power to be reduced rate if made for a “qualifying use”, which includes a supply of electricity “to a person at any premises… not provided at a rate exceeding 1000 kilowatt hours a month”.
CMS believed it met this threshold, arguing that it did supply did electricity to individuals, with each person receiving no more than 1,000kWh/month. HMRC, counter-argued that CMS had misinterpreted the wording of the act, as the supply was not made at the recipient’s premises, but at a CMS site.
THE CRUX OF THE MATTER
It was clear that this case revolved around each side’s interpretation of the notes to VATA 94 Sch 7A Group one, which allows a supply of fuel/power to be at the reduced rate if made for a “qualifying use”. The notes state that qualifying use embraces domestic use and also includes this wording: “a supply of electricity to a person at any premises… not provided at a rate exceeding 1000 kilowatt hours a month”.
CMS considered that it had met this condition, supplying as it did electricity to individual persons, with each person receiving no more than 1,000kWh/month. HMRC, however, stood by its interpretation and argued that CMS had misinterpreted the meaning of the notes wording.
They argued that the notes implied that the supply must be made to the recipient’s premises, with CMS’s site being neither the customer’s premises nor in fact likely premises at all, as “premises” requires a building. It also believed that the 1,000kWh/month should be pro-rated to the length of the supply, which for CMS was often ad hoc and so a single day equivalent of 33kWh should be used.
WHAT DID THE TAX TRIBUNAL (FTT) THINK?
The FTT considered that the notes included two requirements – that the supply was “to a person at any premises” and that the supply, plus other supplies to that person “did not exceed 1,000kWh/month”. It found no implication in the wording of the note, that the recipient must have some connection with the premises in question, nor that premises should only include buildings, Strike one against HMRC!
The FTT also found no reason to accept HMRC’s interpretation that the 1,000kWh should be apportioned where the period of engagement is less than a month, finding that an “ad hoc” supply should be treated as for a continuous supply when considering the limit. This was despite noting that a savvy customer could, in theory, obtain multiple reduced-rate amounts by changing supplier during the month. Strike two!
The final coup-de-grâce to HMRC’s arguments was that their claim that CMS’s interpretation breached EU law, which was dismissed as it has never been challenged by the EU Commission since the Act had been passed into law, some 30 odd years earlier. Strike three and out!
WILL HMRC APPEAL?
Having had their arguments demolished, HMRC will no doubt go back to their ivory towers, lick their wounds and inevitably return to appeal the tribunal’s decision, given the significance of the decision for taxpayers generally.
If other companies follow CMS’s lead nationally it could potentially cost the government many millions in VAT. Given what’s at stake It would be quite frankly astounding if HMRC did not appeal this further, given the significance of the decision
ACCOUNTANT’S VIEW
I always enjoy reading tribunal cases in which HMRC gets a bloody nose, but I have no doubt that I will be reporting on round 2, in the not so distant future.
