The future of electric cars and eco-friendly vehicles is booming. With more users switching to eco-friendly cars, the question of reclaiming VAT on their mileage arises frequently.
The answer to this most asked question is Yes; you can claim VAT back on electric car mileage, but it is subject to some strict conditions. VAT on business mileage for electric cars can only be reclaimed if they are solely used for business purposes.
Featured snippet: VAT can only be reclaimed if the vehicle is used solely for business purposes. Personal use of the car disqualifies VAT reclaim. Accurate and detailed mileage records must be maintained to prove the vehicle’s exclusive business use.
So, how does VAT reclaim operate for businesses that want to take advantage of the tax return? This blog will explain everything you need to know about claiming VAT back on electric car mileage.
What is classed as a commercial vehicle for VAT purposes?
Commercial vehicles are solely used for business activities. Examples include vans, trucks, crew cabs, and certain cars that meet specific criteria.
These commercial vehicles must be integrated into the business purpose and should be appropriately documented. You must have seen businesses delivering their products using trucks, vans, and lorries—these are some examples of commercial vehicles.
Should I claim VAT on electric vehicle mileage?
The simple answer is yes, you can. You must claim vehicle mileage if it is used for business purposes. Keep in mind that you need accurate records of the mileage to substantiate your claims.
However, you won’t be able to claim the full 20% VAT you are accustomed to. VAT on residential power is taxed at 5%, meaning a VAT claim for the domestic electricity used to charge your car is probably not worth processing.
You should also reclaim VAT on the electricity used to charge your electric vehicle by keeping the electricity bill totalling the amount reclaimed. Some electrical companies only provide VAT-compliant consumer bills on commercial tariffs, not domestic traffic.
If the vehicle is used for personal and business purposes, you can’t claim it on VAT mileage.
Can VAT be reclaimed for business miles using a personal electric car?
To reclaim VAT on electric automobiles or any other sort of car, it must be used solely for business use. If you use the vehicle for both personal and business purposes, you cannot claim any VAT on it.
If you or any of your employees use the car for personal purposes, you will incur a benefit in kind and must pay income tax and national insurance on it. You will also need to complete a P11D.
Remember that if you use your electric company car to drive between your home and your company, HMRC considers it personal use rather than business travel!
How to claim mileage for a company electric vehicle
When claiming VAT on mileage allowance, the amount received is determined by the number of miles.
For the first 10,000 miles, vans and automobiles can claim up to £0.45 per mile, with an additional £0.25 per mile after that. The 45p is divided into two parts: fuel and wear and tear. A business owner can reclaim the fuel cost.
Here are step-by-step processes by which you can easily claim the mileage for your company’s electric vehicle:
- Keep Mileage Records: Keep accurate records of all business miles travelled. This comprises the date, destination, purpose of the journey, and kilometres travelled so that you have proper records when HMRC asks for details.
- Calculate Your Mileage Allowance: Use the HMRC-approved rates to determine the allowance. This could be a flat amount per mile or actual costs incurred.
- Maintain Proper Records: Ensure that all records are accurate and up-to-date. This involves keeping invoices for any vehicle-related expenses, such as charging costs.
- Reclaim Your VAT: According to HMRC guidelines, use these records to reclaim VAT on the mileage allowance.
What expenses can be included in VAT reclaim for electric cars?
Expenses that can be included in VAT reclaim for electric cars if they are only used for business reasons include:
- Charging Costs: The expenses incurred at public charging stations or commercial premises.
- Maintenance and Repairs: The costs of maintaining and repairing the electric car.
- Insurance: The cost of business insurance for electric vehicles.
- Other business-related operating costs: This includes road tax and breakdown coverage.
It is crucial to keep accurate records of all expenses to verify their eligibility for VAT return.
So, these are the expenses that can be included while reclaiming VAT for electric cars.
Looking for VAT advice? Get in touch with CloudCo Group
Businesses that follow these instructions and keep correct records can efficiently handle VAT reclaims for electric car mileage, petrol or diesel vehicle mileage, and other related expenses. Ensure compliance with HMRC guidelines to optimise your VAT recovery process.
If you are also looking for VAT advice, CloudCo Group can provide expert guidance on VAT reclaim and other corporate tax concerns.
Our team of experts can assist you in navigating the complexities of VAT legislation and maximising your VAT reclaim prospects. Contact us today to learn more about VAT reclaims.
