The issue around public electric vehicle charging being at 20% VAT will not be considered in the Office for Zero Emission Vehicles’ (OZEV) price of public charging review.
The news comes as the UK Government organisation announced its terms of reference for its review, which will be led by Philip New.
It will focus on the cost of public charging and how it could change without intervention, the cost of charging relative to ICE vehicle refuelling, and the cost savings from possible policy shifts.
The review will also assess three impacts on the costs to other energy consumers; fleet operators charging at depots; and access to domestic charging.
But it will not look at the disparity between the 5% charging cost for VAT on domestic energy against the 20% VAT for public charging, and it follows the UK Government appealing the Tax Tribunal’s decision that the 5% VAT rate should apply to public charging – under “de minimis” provisions, where small-scale supplies of electricity are supplied for domestic consumption.
Options and recommendations from the review will be broken down into regulation, government funding, wider government policies, market-based trading schemes, and dynamic pricing.
The report will be also be split into three sections on government and industry interventions to reduce costs, a review of current costs and how these have changed, and an assessment of how it could change in the future.
It is due to report back in the autumn of this year.
OZEV, a joint unit between the Department for Transport and the Department for Energy Security and Net Zero, will report to ministers in these departments, as well as His Majesty’s Treasury.
The review will be developed in collaboration with Ofgem, given its responsibilities for energy sector regulation in Great Britain, it added.
Where relevant policy is devolved, the review will also consider impacts and outcomes with the devolved governments.
Speaking about the review, Head of Electrical Transport Systems at BEAMA, Matt Adams, said:
“It’s difficult to see how a review focused on the cost of public charging can deliver its full potential, when it has already ruled out making recommendations on tax policy.
“Aligning VAT rates between public and domestic charging has long been one of the most widely discussed options for reducing charging costs. By ruling out tax policy recommendations from the outset, Government risks missing an important opportunity to address one of the most persistent cost barriers facing EV drivers.
“With eVED due to come into force in 2028 which effectively increases the cost of owning an EV, now is precisely the time to be considering every option available to improve affordability.
“Our analysis suggests eVED could cost the UK more than £4 billion a year in tax revenue by pricing drivers out of making the switch to electric vehicles.”
Vicky Edmonds, Chief Executive Officer of EVA England, said:
“EVA England has welcomed the Government’s cost of charging review and its focus on cutting costs for drivers – a major barrier to the transition to electric. Our own driver research shows that 75% of drivers now see public charging costs as the biggest hurdle to driving electric.
“It is disappointing that VAT has been left outside the terms of reference, given the clear unfairness between drivers who can charge at home and those who rely on the public network.
‘However, VAT is only one part of huge challenge. On its own, it wouldn’t be enough, and we need to see real structural reform that brings down chargepoint operating costs and that reflects a broader set of issues around pricing transparency, reliability and access to chargers, especially for renters, lower and middle-income households and people without driveways.
“This review must look seriously at every practical measure that can bring down costs and improve the charging experience for drivers. The transition will only succeed if public charging is not just available, but fair, affordable and trusted.”
Guy Bartlett, Believ CEO, said:
“Believ welcomes the Government’s launch of the Cost of Charging Review, as committed to after last year’s Autumn Budget. We’re encouraged to hear Philip New will chair the work – his energy expertise will be a real asset in turning this into practical, evidence-led reform.
“This is a critical opportunity to tackle one of the biggest barriers to EV adoption – affordability. While it already costs less to run an EV than a petrol or diesel vehicle, more cost benefits are essential to help drivers invest in a new vehicle.
“Today, drivers who can charge on a driveway typically benefit from 5% VAT, while those without off-street parking pay 20% on the public network, an inequity that risks slowing EV adoption. The review should also address standing charges, which weigh heavily on a pre-profit EV charging sector, and penalise it for building infrastructure ahead of demand; reform here would reduce costs for drivers and help keep the UK charging market investible.
“Public charging is a critical enabler of the EV transition, yet charge point operators have had comparatively little relief from wider energy cost pressures, so this review is an important step.”
Image courtesy of Green Car Guide
