UK government should introduce a reduced or zero-rate of VAT for EVs

Commenting on the recent Public Accounts Committee report on electric vehicles (EVs) and the fact that the UK has ‘no clear plan’ to reach electric vehicle targets, Glyn Edwards, Director of MHA’s Automotive Sector team, believes the UK government should introduce a reduced or even zero-rate of VAT for EVs to entice consumers to buy electric cars:

“A key concern of the Public Accounts Committee (PAC) report released today (19 May) is the relative unaffordability of electric cars, with only 13 electric car models costing less than £30,000. Relative to internal combustion engine (ICE) vehicles, price differentials make it difficult to convince customers to switch to electric, especially when other issues such as range and charging anxieties feature in consumers’ minds.

“One way to address this would be to introduce a reduced or even zero-rate of VAT for EVs. On a car currently retailing for £30,000 inclusive, a zero-rate would reduce the price by £5,000. If applying a VAT relief to prestigious high-value vehicles might be politically difficult, then this reduced or zero-rate could be targeted at vehicles below a certain value. Applying a cap would also encourage manufacturers to drive down retail prices further encouraging the take-up of cleaner transport.”

The MHA Automotive and EV Advisory team led by Partner Steve Freeman have also teamed-up with other automotive sector suppliers to create an EV Alliance aimed at helping car retailers and manufacturers transition to a zero emissions future.