Reclaiming VAT on fuel for private use

The system for dealing with VAT on road fuel for private use was streamlined in 2014 bringing UK law in line with EU law.

Previous system

The use of business goods for private purposes is deemed to be making a supply for VAT purposes and VAT must be accounted for. The same principle applies where a business's road fuel is used in making private journeys, where input tax has been claimed on the cost of the fuel.

The recommended methods currently in use are:

  • Claim no input tax and declare no deemed supplies
  • Maintain accurate mileage records so that the business and private motoring can be identified and use them to claim only VAT on road fuel used in business journeys
  • Claim all input tax on road fuel and declare flat-rate valuation of supplies

The third method allows UK taxpayers to value such deemed supplies on a simplified flat-rate basis - 'the road fuel scale charge'. The charges, set out by HMRC, reflect the average cost of fuel and are updated at least once a year to reflect changes in road fuel prices. The updated rates are announced as part of the budgeting process.

The scale charge assumes private motoring of 10,000 - 13,000 miles a year, depending on the engine size and mileage per litre of the vehicle.  Private motoring includes journeys from home to work.

Outline of changes as from 1 February 2014

The revalorisation of the 'road fuel scale charge', previously an annual budget measure, will automatically be calculated by HMRC (to a formula set out in the Order) independent of the Budget process. Future revisions will take place at least annually.

There will be no change to the way in which the charges are calculated. The scale charges (flat rate valuation) will continue to have the force of law, and their use will be optional. Businesses may still use other reasonable methods to account for the private use of business fuel as outlined above. This change is not expected to have any economic impacts and should have no practical implications for businesses because it is just a process change.

Partial Exemption concession

As part of the streamlining process, HMRC has reminded taxpayers that the partial exemption concession on road fuel scale charges has been withdrawn with effect from 1 January 2014. This means that partially exempt businesses will no longer be able to reduce the scale charges (flat rate valuation) by applying the partial exemption recovery rate to them.

If as a result of the withdrawal of this concession, or for any other reason, businesses consider that their current partial exemption method will not give a fair and reasonable recovery of input tax, they should contact HMRC requesting a new method.

VAT Flat Rate Valuations 2015-16

The charge applies to any businesses which recover input tax on fuel used in cars for private motoring.

These are the charges which apply from the start of the first prescribed accounting period beginning on or after 1 May 2015.

CO2 emissions
Quarterly VAT
(g/km)
Fuel scale
charge
£
VAT on
charge
£
Below 120
133
22.17
125 - 129
200
33.33
130 - 134
213
35.50
135 - 139
227
37.93
140 - 144
240
40.00
145 - 149
254
42.33
150 - 154
267
44.50
155 - 159
281
46.83
160 - 164
294
49.00
165 - 169
308
51.33
170 - 174
320
53.33
175 - 179
334
55.67
180 - 184
347
57.83
185 - 189
361
60.17
190 - 194
374
62.33
195 - 199
388
64.67
200 - 204
401
66.83
205 - 209
415
69.17
210 - 214
428
71.33
215 - 219
441
73.50
220 - 224
455
75.83
225 and above
468
78.00

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