Government rules out VAT cut, EV grants in response to Lords report
Mon 22 April 2024
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The Government has responded to the House of Lords Environment & Climate Change Committee's EV inquiry saying that it will not change VAT rules for public EV charging or bring back incentives to stimulate sales of electric cars.
The Lords report, published in February, warned that a combination of higher purchase costs, insufficient charging infrastructure and mixed messaging was threatening the continued adoption of electric cars.
While noting agreement with many of the report's findings, the Government said it disagrees with commitments around infrastructure, as well as new incentives to purchase EVs and proposals to equalise the VAT differential between public and domestic charging.
On the issue of public charging costs, the Govenment said: “VAT is a broad-based tax on consumption and the 20% standard rate applies to most goods and services. Whilst there are exceptions to the standard rate, these have always been limited by both legal and fiscal considerations.
“Expanding the VAT relief already available would impose additional pressure on the public finances to which VAT makes a significant contribution.
On the reintroduction of incentives, the Government said: “Government grants have been in place for over a decade to help reduce the up-front purchase price of new EVs. All Government grants are kept under review to ensure the best value for money for the taxpayer. The Plug-in Car Grant was closed to new orders on 14 June 2022, having injected £1.5 billion in taxpayer funding to support the growth of the early electric car market.
“In June 2022, the Government published a public evaluation report, which highlighted that the Plug-in Car Grant was vital in building the early market for electric vehicles. It then had less of an effect on demand than other existing price incentives, such as company car tax.”
In response to the Government’s comments on the Lords' report, chair of the inquiry, Baroness Parminter, said: “Whilst we welcome the Government’s acceptance of some of the recommendations in our report, it is particularly disappointing that it is not committing to incentivising the purchase of more EVs, equalising the VAT differential between public and domestic charging, or addressing our concerns about barriers to charging in multi-occupancy buildings.
“If implemented, these recommendations would help people to adopt EVs and ensure a smoother journey towards net zero. Peers will keep urging the Government to do more, as otherwise the EV revolution is a non-starter.”
Photo by Andrew Roberts on Unsplash
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