Car tax changes: New calls for VAT exemption for used vehicles to ‘incentivise sales’

Martin Lewis gives money-saving advice on VED car tax

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BT’s EV Fleet Accelerator Group report has recommended a VAT exemption for second-hand electric cars to boost sales. The report claims VAT exemption would “incentivise sales” and could help “broaden access” to electric technology.

They warn a lot of current incentives in the electric car market are aimed at new vehicles which many people can’t afford.

Instead, they have called for extra incentives for the second-hand market such as reducing charging VAT rates.

They warned under the current policies, the second-hand market “remains a barrier” to electric car transition.

The report said: “Fleets are a significant driver of the second-hand market, with many second-hand cars coming from ex-fleet models.

“However, the majority of current incentives are aimed at the new car market, meaning the secondhand market remains a barrier, not an enabler, for sole-traders and small businesses who would want to make the transition to EVs.

“We recommend a VAT exemption for second-hand EVs, which could incentivise sales and broaden access, faster, to EV technology.”

Earlier this year, HMRC confirmed drivers will pay 20 percent VAT on charging their electric vehicles.

There is no exemption or reduced rate of VAT charged because supplies are issued to various places and not a person’s house.

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HMRC said the 20 percent VAT rate was because supplies are not issued to one person where the rates can be properly calculated.

There is a reduced rate of VAT for supplies of small quantities of electricity to charge a vehicle.

This is known as a ‘de minimis’ provision but certain guidelines must be met.

Firstly, the electricity supply must be ongoing to a person’s house or building and must use less than 1,000 kilowatt-hours a month.

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