What are fuel scale charges?

If a VAT registered business purchases road fuel for business use, but there is also a private use element, an adjustment is required to account for VAT claimed on the private usage of the fuel. This is done by using the VAT fuel scale charges to add back a fixed sum as determined by HM Revenue & Customs. As with car and fuel benefits the CO2 band is used to calculate the scale charge.

The scale charges are added to Output VAT on the VAT return thereby increasing the amount owed to HMRC.

The charges are updated annually with the last amendment occurring on 1 May 2015. The new scale charges should be applied from the start of the next prescribed accounting period beginning on or after 1 May 2015. The current rates can be found on (https://www.gov.uk/government/publications/vat-road-fuel-scale-charges-table)

Who does it apply to?

The law, together with the concessions, gives businesses three options of accounting for VAT on road fuel applied to private use:

1) Claim no input tax on road fuel and declare no deemed supplies; or

2) 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; or

3) Claim all input tax on road fuel and declare road fuel scale charges.

What constitutes private use?

For the purpose of fuel scale charges, fuel is provided for, or appropriated to, private use if:

(a) it is provided or is to be provided by the taxable person:

(i) to an individual for private use in the individual’s own car or a car allocated to the individual, and

(ii) by reason of the individual’s employment,

(b) where the taxable person is an individual, it is appropriated or to be appropriated by the taxable person for private use in the taxable person’s own car, or

(c) where the taxable person is a partnership, it is provided or is to be provided to any of the individual partners for private use in that partner’s own car.

What is best?

If your mileage is low and therefore fuel costs are likewise low it may be best not to claim VAT on fuel purchases as the scale charge could be more than the VAT claimed. It is therefore advised that calculations are made to ensure that the VAT on scale charges is not costing you more than the business is reclaiming on their VAT return.