Through our VAT review services we come across many common errors. One in particular relates to input tax reclaims on road fuel.
We have put together the following guidance to help clear up common misconceptions and errors.
Reclaiming VAT on business fuel costs
There are 4 ways of claiming input tax (vat) on road fuel:-
- If the vehicle is used 100% for business purposes: then 100% of the input tax (vat) is reclaimable. This would normally apply to pool cars and does not include any private mileage (i.e. home to work travel etc).
- The HMRC scale charge is applied: again, 100% input tax (vat) can be reclaimed. A fixed charge is included in the output vat (sales) box on the vat return. The charge is obtained from tables published by HM Revenue & Customs, determined by the vehicles CO2 Emissions.
Example: The vat inclusive scale charge for a vehicle with CO2 emissions of 140 is £104 per month. £17.33 of vat would be added to the Box 1 output tax (sales) figure per month on the vat return.For this to be financially beneficial your monthly cost on fuel would need to exceed £104 per month.
- Maintain accurate mileage records: business and private motoring need to be split as only vat on road fuel used on business journeys can be reclaimed.
At HMRC’s current rates, for example, a petrol car which is 1400cc or less , 14p of the 45p claimed as business mileage is for the fuel element. The 14p is vat inclusive so the vat claimable per mile is 2.333 pence.
Please note that the 45p rate per mile reduces to 25p after 10,000 miles.
When maintaining accurate mileage records the business must include the following:
- The type of fuel
- The cylinder capacity of the engine
- The destination and origin of the trip
- The purpose of the trip
- The amount of mileage that counts as business travel
- The vat receipts for the fuel costs related to the journey
Below are a couple of useful hyperlinks:
- Treat no vat as input tax – So don’t claim any vat as the cost of using the scale charge would actually increase your vat liability (or reduce your vat reclaim).
There are 4 options:
- 100% used for business purposes therefore all vat can be reclaimed
- 100% reclaimable by adding the scale charge adjustment to Box 1 on your VAT return
- Don’t reclaim any vat as scale charge exceeds vat incurred and don’t want to maintain accurate mileage records.
- Maintain accurate mileage records so that business and private motoring can be identified and use these to claim only vat on road fuel used in business journeys. Staff can then be charged accurately for the fuel they use privately or calculate deemed supplies accurately.
There are NO restrictions on claiming back the vat paid on vans are they are considered commercial vehicles where any private use is minimal.
In addition, please find the following guidance on claiming VAT input tax on vehicle repairs and maintenance.
If you use a vehicle for business purposes, you can reclaim the VAT you were charged on repairs and maintenance as input tax as long as the business paid for the work. It does not matter if the vehicle is used for private motoring or if you have chosen not to reclaim VAT on road fuel. If you’re a sole proprietor or partner and use a vehicle solely for your own private motoring you cannot reclaim the VAT on repairs as input tax.
The following link provides further guidance:
Please do not hesitate to contact us if you require any assistance or clarification.