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Car Fuel and VAT - Your Options

With car fuel becoming more expensive by the week, the amount of VAT which can be recovered on fuel used for business purposes is also rising. There are three ways in which car fuel can be dealt with for VAT purposes:

1. The Scale Charge

If fuel is provided for motoring which includes private motoring, a ‘fuel scale charge’ is paid to HM Revenue and Customs (HMRC) as additional output VAT when the VAT return is submitted. This system favours businesses with employees who do quite a lot of private mileage.

2. The Strict Method

In this system, a detailed mileage log is kept and VAT on private mileage is not claimed. The total VAT on fuel is worked out and only the business proportion is claimed. This system necessitates keeping detailed and accurate records, which can be onerous, but is normally the best method to use.

3. Do Not Claim VAT

A scale charge is not applied where there is no claim of input VAT on fuel. This system may suit businesses with very low business mileage.

However, an alternative method is applicable which can be efficient for many businesses. In this case, the employee pays the cost of fuel and provides a record of business mileage done. The employee must provide the VAT receipts for their fuel purchases. Using this method allows the employer to reimburse business mileage at the rates below and to claim the VAT element (7/47 of the payment made) as input tax.

The rates currently applicable are:

Engine Size	Petrol	Diesel	LPG
1400cc or less	11p	11p	7p
1401cc – 2000cc	13p	11p	8p
Over 2000cc	19p	14p	11p

Contact us for advice on your business matter on 01604 609560

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Call us now on 01604 609560 for more information
or email us at info@dfalaw.co.uk