Electric vehicle drivers could see the 20 per cent charging VAT rate reduced to five per cent as the Government looks to broaden its incentivise for drivers.
The Government said it will keep the VAT tax change “under review”, refusing to rule it out after a committee report called for the reduction to apply to public charging to help driver manage costs.
The Lords Environment and Climate Change Committee report stated that the change in price would encourage more drivers to switch as petrol and diesel prices remain costly.
Despite the recommendation, the Government shared its disagreement with the recommendation, explaining that VAT is a broad-based tax on consumption and the 20 per cent standard rate applies to most goods and services.
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VAT reduction would encourage more drivers to switch, Committee noted
PAThe Government stated that by expanding the VAT relief already available would “impose additional pressure” on the public finances to which VAT makes a significant contribution, but added that the tax will remain “under review” and would look into the recommendation.
The committee review examined how impactful the current support measures for drivers are to help them purchase an electric vehicle.
The review, however noted several failings by the Government in the level of support and incentive measures, which need to be enhanced.
The Committee report said it was “disappointed” with the lack of incentives launched by the Government to help more drivers switch to EVs and without the support the transition to net zero is a “non-starter”.
The Committee recommended that the Government ramp up its short-term focus on targeted action to remove road blocks before trying to reach its end 2030 goal.
It highlighted how the lack of charging points and overall cost remain barriers which the Government need to overcome to help more drivers make the switch.
Looking at the long-term, the Committee stated that once there is an infrastructure in place for drivers to easily switch to EVs, then they should set out the actions that needed in the next 10 years to meet the targets.
Baroness Parminter, chair of the inquiry 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.”
Another recommendation included prioritising securing additional gigafactories to ensure a domestic supply chain rather than relying on imports from other countries for batteries.
The Government said it agreed with the recommendation but noted that it is not possible (or even desirable) for the UK to onshore all aspects of critical mineral supply chains.
The response detailed: “Resilient global supply chains have a diverse supply base and rely on global markets and an effective trading system.
“The UK and others benefit from such a system, and we will work with our partners to promote it. Simultaneously, the UK can benefit from a more diverse supply of critical minerals, as key producer countries invest in new capacity.”
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