VAT Update – March 2026

HMRC’s position regarding the VAT rate which applies to supplies of electricity for charging electric vehicles (EV) at public charging stations, has been that the standard rate applies. They have maintained that the 5% VAT rate only applies with respect to electricity supplied for home charging points. The First Tier Tax Tribunal (FTT) has ruled in Charge My Street Limited [2026] UKFTT 318 (TC) that the 5% VAT rate can apply to public electric vehicle charging subject to the de minimis limit for domestic supplies.

Charge My Street centred on the application of the law which enables 5% VAT to be applied to domestic supplies of electricity under a certain limit. Note 5(g) Item 1, Group 1 Sch 7A VATA 1994 provides that electricity supplies to a person at any premises which does not exceed 1,000 kWh (kilowatt‑hours) per month, qualifies as a domestic supply and eligible for the reduced rate of VAT.

Charge My Street Limited (CMSL) is a social enterprise which installs and operates community EV charge points typically located in public car parks, and car parks at pubs, schools and village/community halls. CMSL doesn’t own the sites but obtains leases/rights.

CMSL argued that its supplies should be taxed at the 5% VAT rate which applies to domestic supplies.

HMRC disagreed and said the standard 20% VAT rate should apply because:

• Supplies are not made ‘to a person at any premises’ within the meaning of Note 5(g),
• The ‘rate’ must be calculated over the short actual charging session, not the full month (so the 1,000kWh threshold is exceeded),
• Public charge points are not the recipients’ ‘premises’, and
• Many supplies are made to intermediaries, not the individual charging their EV.

The FTT found:

1. The concept of ‘premises’ is not limited to buildings; public charge points can be treated as premises for VAT purposes.
2. The premises do not need to have a specific connection to the customer.
3. The rate refers to total electricity supplied by one supplier, at one premises, to one person in a month.
4. Supplies of less than 1,000 kWh per customer per month meet the de minimis rule, qualifying for 5% VAT.
5. Location must allow measurement and identification of kWh supplies to a single person by a single supplier.
6. There does not need to be a continuous contractual arrangement between supplier and customer.

On the point regarding who the electricity was being to, the FTT considered each payment method available including Fuuse app, contactless, and Pay & Charge via a QR code.

The FTT held:

1. The Fuuse app only provides a means of payment through software and invoices CMSL for provision of software services.
2. CMSL is the supplier because it owns/operates the charge points, manages customer issues, receives payment directly (via Stripe).
3. With respect to the arrangements with third-party applications the contractual terms indicate these providers function as principal or as commission agent. They buy electricity from CMSL and make an onward supply to the drivers. They have pricing control. Consequently, CMSL supplies the third-party application provider, not the end driver on those instances. 

The headline conclusions from the case are:

1. Note 5(g) can apply to Charge My Street Limited EV charging supplies.
2. Public charge points are premises for the purposes of the reduced rate.
3. Rate limit is based on monthly total kWh, not session duration.
4. For supplies made direct to the drivers, CMSL can apply the 5% rate if usage <1,000 kWh/month per driver, per charge point.
5. For third-party apps, CMSL supplies to the application provider and in that case, whether supplies exceed the 1,000-kWh threshold depends on combined monthly usage per application provider, per location.

Comments

This is a significant judgment for operators of public EV charging points, who should review their VAT position now. While an FTT decision is not binding other than on the parties to the particular case, and HMRC may appeal the decision, providers should certainly consider whether they can take steps to form a basis from which 5% VAT can be applied on qualifying supplies.

Claims for previously overdeclared VAT are likely to be challenging not least because of the unjust enrichment argument HMRC would be expected to raise. VAT unjust enrichment enables HMRC to refuse or restrict repayment of overpaid VAT where the claimant would be unjustly enriched by the refund. The defence applies when a business has passed the VAT burden to customers and would therefore receive a windfall if HMRC repaid the tax without requiring customer reimbursement.

Please get in touch with Nick Hart, VAT Partner, if you’re a supplier to EV charging services and would like to discuss the implications of this for your business and VAT position.

In our VAT Update from September 2024, we commented on the First-tier Tribunal’s (FTT) decision regarding the VAT treatment for Lycamobile UK Limited’s (Lycamobile) prepaid telecoms plan bundles. The FTT had agreed with HMRC that the payment by customers for the bundles was chargeable to VAT at the point of acquisition and not to the extent to which the services in the plan bundles were used by Lycamobile’s customers. The FTT also concluded that Lycamobile should have made retrospective adjustments for bundles issued before 1 November 2017 to reflect the proportion of non-EU Roaming Calls value added services (VAS) used in non-EU countries.

Lycamobile appealed to the Upper Tribunal (UT)

In the UT’s recent decision, Lycamobile UK Ltd v Revenue and Customs [2026] UKUT 74 (TCC) (12 February 2026), the UT considered whether the FTT applied the law correctly and reached the appropriate conclusions.

Lycamobile, a mobile virtual network operator (MVNO), supplies prepaid ‘plan bundles’ that give UK customers rights to access telecommunications services including telephone calls, text messages and data. Lycamobile treated these bundles as being supplied only when the services were actually used by their customers. Lycamobile accordingly accounted for output VAT as and when the customers consumed the services provided in the bundle. Lycamobile did not account for VAT on any unused elements of the services and the supplies used and enjoyed outside the EU were treated as outside the scope of UK VAT.

HMRC disagreed with this approach and argued that VAT became due when customers purchased a plan bundle, regardless of whether the services were actually used by the customers. Based on HMRC’s viewpoint, they issued assessments totalling approximately £50 million covering the VAT periods between 2017 and 2019.

The UT upheld the FTT’s reasoning and agreed that the supply in question was the grant of a right to use telecommunications allowances, which were supplied in full at the point of sale. The UT also found that the plan bundles sold did not meet the statutory definition of a voucher before or after 1 January 2019.  The UT further confirmed that a retrospective VAT adjustment was required for the bundles used outside the EU before 1 November 2017, but otherwise VAT was due immediately upon the purchase of the bundles.

In addition, the UT held that the ‘value added services’ included with certain bundles were ancillary to a single composite supply of telecommunications services rather than separate supplies with separate VAT liabilities.

Comments

Following on from the FTT’s findings, the UT conclusively dismissed Lycamobile’s appeal (on four grounds) against HMRC’s decision to assess for under-declared output VAT of approximately £50 million.

The UT’s decision provides important clarity for businesses that rely on the multi‑purpose voucher provisions or businesses that supply bundled services where customers may not use the full extent of the services provided. The decision confirms that where a business grants a right to access services, VAT may become due at the point of sale, even if the customer does not make full use of the bundled services.

If you’re a business relying on the provisions related to multi-purpose vouchers or you are providing a bundle of services which the customer may not ever fully use and are delaying bringing VAT to account as a result, we would recommend speaking with one of our VAT experts for further guidance in light of the Lycamobile decision. Please contact Nick Hart, VAT Partner, for assistance.

The First‑tier Tribunal (FTT) case Aspire in the Community Services Ltd v HMRC [2026] UKFTT 00263 (TC) considered whether Aspire in the Community Services Ltd (ACSL), a provider of residential and transitional care services, could recover VAT it incurred before registering for VAT, under Regulation 111 1994 VAT Regulations 1995 (SI 1995/2518).

Regulation 111 provides an opportunity for businesses to reclaim VAT on costs incurred before the effective date of VAT registration, but at HMRC’s discretion. Because this rule is discretionary and the position often disputed, it’s particularly relevant for care providers, charities, newly VAT‑registered private schools, and other partly‑exempt organisations that start making taxable supplies.

Aspire in the Community Limited (ACL) historically provided VAT exempt welfare services. ACSL was set up later to take over supplying local authorities and clinical commissioning groups. ACL and ACSL formed a VAT group in 2021, with ACSL as the representative member. ACSL is not registered with the Care Quality Commission (CQC), meaning its welfare services are standard‑rated, and not subject to VAT exemption. The VAT group registered for VAT from 1 May 2021. Before this date, ACSL made no supplies, and ACL made only VAT exempt supplies. In its first VAT return (period to 31 July 2021), ACSL claimed £31,727.29 of input tax, including VAT on pre‑registration costs, even though no taxable supplies had yet been made. HMRC opened an enquiry and reduced the recoverable amount to £7,138.

The key issue in the appeal was whether pre‑registration use should be considered when HMRC had already allowed VAT to be treated as input tax under Regulation 111.

HMRC argued that pre‑registration use must be considered. They said VAT on goods should be reduced (‘depreciated’) over an assumed five‑year life to reflect exempt use before registration. ACSL argued that Regulation 111 already determines what VAT can qualify for recovery, and once HMRC accepts an amount as ‘input tax’, it should be allocated based only on current and future use, not past use.

The Tribunal agreed with ACSL. It held that Regulation 111 treats pre‑registration VAT as if it were incurred in the period of the claim, meaning it is recoverable on the first return after registration. A backwards‑looking adjustment is not permitted. Only post‑registration use should be considered. The Tribunal also noted that the partial exemption rules (including the use‑based method) do not allow HMRC to factor in historic use. In the court’s view HMRC has no legal basis to override these rules by applying its own approach.

Comments

Although an FTT decision is not binding on parties other than the appellant in this case, the decision provides a potential opportunity for organisations that recently moved from making exempt supplies to making taxable activities, to review pre‑registration VAT claim made in the past four years. If HMRC previously restricted claims by applying depreciation or historic‑use adjustments, there may be scope to review those calculations and seek professional advice to determine if further VAT can be reclaimed.

For further information, please contact Nick Hart, VAT Partner.