A collaboration of businesses, led by FairCharge, Auto Trader and E.On, is calling on the Government to reduce VAT on public EV charging and revisit consumer incentives in this week’s Spring Budget.

Tackling the current “illogical” VAT policy on charging would be a consumer win

In an open letter, FairCharge founder Quentin Willson and businesses across sectors including charging, automotive and power urged the Chancellor to cut the VAT and boost EV adoption and affordability.

The collaboration says that tackling the current “illogical” VAT policy on charging would be a consumer win. VAT on domestic electricity is charged at 5% whereas those using public charge points unfairly have to pay 20% VAT – but this impacts the c.40% of drivers who don’t have access to a driveway to install a home charger.

The firms say that charging businesses would pass the reduction onto consumers, giving a near-immediate net positive effect on charging costs. They back this up by pointing out that the VAT reduction would accelerate the speed of adoption of EVs and give business and consumers renewed confidence in the switch following the 2030 rollback to 2035.

Quentin Willson, FairCharge founder, said: “If the Government is serious about wider EV adoption, they must revisit this out-of-date VAT legislation – written in the early 1990s before the arrival of electric cars – and make it fit for purpose. The cost to the Treasury would be very small compared to the hundreds of billions spent supporting fuel duty, but the benefit to EV drivers without private parking and to urban air quality would be significant and remove this unnecessary barrier to EV adoption.”

The campaign has wide-ranging support – including from E.On. Dev Chana, managing director of E.On Drive Infrastructure, said: “Taxing EV drivers four times as much for using public chargers is effectively a tax on people who don’t have a driveway. A fairer system which charges the same rate of VAT wherever and whenever you charge your electric car would be a real consumer win during this cost-of-living crisis and would also help speed up EV adoption by taking away an unnecessary and unfair cost.”

Ian Plummer, commercial director at Auto Trader, added: “It is simply unfair that EV owners without driveways should have to pay more for the privilege of improving air quality. It’s time for the Treasury to address this injustice and give electric vehicles the best chance of widespread adoption, rather than remaining the preserve of the wealthy.”

Return of EV incentives would benefit everyone, says Fleetcor

Paul Holland, managing director for UK/ANZ fleet at Fleetcor, has also spotlighted the need for consumer EV incentives – while also outlining concerns about support from government for the nation’s EV sector and businesses in their transition.

Holland said: “EV adoption is slowing now that early adopters are onboard and incentives to buy new vehicles and invest in infrastructure have expired. A similar pattern happened in Norway, where after an initial period of enthusiasm, the Government failed to maintain momentum with ongoing or enhanced incentives and new EV sales slowed. New EV registrations dropped from 174,845 in 2022 to 125,407 in 2023 after over a decade of rapid expansion. The Netherlands showed the same pattern: EV sales were high until 2021, then dropped significantly.

“KPMG reported that while EVs were significantly cheaper to run than fossil-fuel vehicles, they cost so much more to buy that consumers are turned off – this is likely doubly true for budget-conscious fleets.

“If we reintroduced more incentives then we could see EV use speed up again, and the UK’s fleets and motorists alike would spend far less on fuel, benefitting everyone.”

Holland also said that positive action on EVs could help drum up political support ahead of a general election.

“The next Budget will be very interesting, both for the UK’s fleets and the country at large. It will be either the last or the second-from-last of the current government, depending on when they call a general election, and with Labour in a 20-point lead in the polls, the pressure will be on to do something transformative in contrast to last autumn’s damp squib.

“Transport, fuel, infrastructure and many of the other aspects of government policy that directly impact the UK’s fleets and many people’s everyday lives would be an ideal place to win back the public’s favour. Doing something to address the worries of the 74% of British adults who are worried about climate change may also win back a sliver of the electorate.

“Recommitting to increasing the number of electric vehicles on the roads could achieve both in a single piece of legislation, but there are many reasons to believe that this won’t happen. Despite being a common-sense matter of one fuel (electricity) costing far less than another (fossil fuels), EVs are one front in a larger culture war, and it may be that the Government doesn’t want to alienate its core voters. It should be noted that, based on our own AllCosts report, it is only the case that EV charging is significantly less expensive than petrol and diesel if drivers are charging at home – public charge points can cost 20 times more than home charging.”

He summed up: “With Labour backing away from their climate pledge, there is a gap in the political market for leadership on climate that also benefits companies and drivers, but I am sceptical that this will happen in the forthcoming Budget.”