Topical Tip:
TT103: Business Fuel VAT Scale Charge
The VAT scale charge
Businesses can reclaim the input VAT they incur on fuel costs, however if the vehicle concerned has a private element of use, for example it is a company car that is being used by an employee, then a certain fixed amount of VAT must be declared as output VAT and paid over by the business. This element of VAT is called the 'scale charge'.
To apply the scale charge first recover all the VAT charged on road fuel (there is no need to split mileage between business and private use), then use the set amounts prescribed by H M Revenue & Customs (HMRC) to declare as output VAT an amount that represents the private usage.
Note that until 2007 the scale charge was based on engine size and the type of fuel used, but with effect from Budget 2007 it is based on carbon dioxide emissions, and for VAT periods starting on or after 1 May 2007 new scale charges apply. For example, if a company's quarterly period ends 30 June 2007, the new scale charge will first apply in period ending 30 September 2007.
Finding out the CO2 emissions for a car
For vehicles registered after 2001, the CO2 emissions figure appears on the Vehicle Registration Certificate (VC5). For vehicles registered between 1997 and 2001 the information can be obtained from The Society of Motor Manufacturers and Traders Limited website. In addition, the Vehicle Certification Agency Car Fuel Data website can be used to search for specific cars. Further historical information is available at The Vehicle Certification Agency. For vehicles which do not have a CO2 emissions figure, the CO2 band is based on engine size, as follows:
- If its cylinder capacity is 1,400 cubic centimetres or less, use CO2 band 140 or below
- If its cylinder capacity exceeds 1,400 cubic centimetres but does not exceed 2,000 cubic centimetres, use CO2 band 175
- If its cylinder capacity exceeds 2,000 cubic centimetres, use CO2 band 240 or above.
- Scale charge based on CO2 emissions
Once the CO2 emissions have been established, the following table can be used to identify the new scale charge rates for VAT accounting periods starting on or after 1 May 2007:
Rates per vehicle
| Monthly VAT returns | Quarterly VAT returns | Annual VAT returns | |||||||
| CO2 Band | Scale charge | VAT due per car will be | Net amount | Scale charge | VAT due per car will be | Net amount | Scale charge | VAT due per car will be | Net amount |
| £ | £ | £ | £ | £ | £ | £ | £ | £ | |
| < 140 | 60.00 | 8.94 | 51.06 | 182.00 | 27.11 | 154.89 | 730.00 | 108.72 | 621.28 |
| 145 | 65.00 | 9.68 | 55.32 | 195.00 | 29.04 | 165.96 | 780.00 | 116.17 | 663.83 |
| 150 | 69.00 | 10.28 | 58.72 | 207.00 | 30.83 | 176.17 | 830.00 | 123.62 | 706.38 |
| 155 | 73.00 | 10.87 | 62.13 | 219.00 | 32.62 | 186.38 | 880.00 | 131.06 | 748.94 |
| 160 | 77.00 | 11.47 | 65.53 | 231.00 | 34.40 | 196.60 | 925.00 | 137.77 | 787.23 |
| 165 | 81.00 | 12.06 | 68.94 | 243.00 | 36.19 | 206.81 | 975.00 | 145.21 | 829.79 |
| 170 | 85.00 | 12.66 | 72.34 | 256.00 | 38.13 | 217.87 | 1,025.00 | 152.66 | 872.34 |
| 175 | 89.00 | 13.26 | 75.74 | 268.00 | 39.91 | 228.09 | 1,075.00 | 160.11 | 914.89 |
| 180 | 93.00 | 13.85 | 79.15 | 280.00 | 41.70 | 238.30 | 1,120.00 | 166.81 | 953.19 |
| 185 | 97.00 | 14.45 | 82.55 | 292.00 | 43.49 | 248.51 | 1,170.00 | 174.26 | 995.74 |
| 190 | 101.00 | 15.04 | 85.96 | 304.00 | 45.28 | 258.72 | 1,220.00 | 181.70 | 1,038.30 |
| 195 | 105.00 | 15.64 | 89.36 | 317.00 | 47.21 | 269.79 | 1,270.00 | 189.15 | 1,080.85 |
| 200 | 109.00 | 16.23 | 92.77 | 329.00 | 49.00 | 280.00 | 1,315.00 | 195.85 | 1,119.15 |
| 205 | 113.00 | 16.83 | 96.17 | 341.00 | 50.79 | 290.21 | 1,365.00 | 203.30 | 1,161.70 |
| 210 | 117.00 | 17.43 | 99.57 | 353.00 | 52.57 | 300.43 | 1,415.00 | 210.74 | 1,204.26 |
| 215 | 121.00 | 18.02 | 102.98 | 365.00 | 54.36 | 310.64 | 1,465.00 | 218.19 | 1,246.81 |
| 220 | 126.00 | 18.77 | 107.23 | 378.00 | 56.30 | 321.70 | 1,510.00 | 224.89 | 1,285.11 |
| 225 | 130.00 | 19.36 | 110.64 | 390.00 | 58.09 | 331.91 | 1,560.00 | 232.34 | 1,327.66 |
| 230 | 134.00 | 19.96 | 114.04 | 402.00 | 59.87 | 342.13 | 1,610.00 | 239.79 | 1,370.21 |
| 235 | 138.00 | 20.55 | 117.45 | 414.00 | 61.66 | 352.34 | 1,660.00 | 247.23 | 1,412.77 |
| > 240 | 142.00 | 21.15 | 120.85 | 426.00 | 63.45 | 362.55 | 1,705.00 | 253.94 | 1,451.06 |
Barnes Roffe Topical Tips:
- Ensure the correct rates are used as these often catch businesses out when a VAT inspection occurs. The relevant VAT and net scale charge should be declared on the Output side of the VAT return
- Ensure that for any vehicles believed to have no private use (e.g. a pool car) that there is evidence to support the fact
- If a car is changed during a tax period and the new car is in a different category, then the VAT should be accounted for by apportioning the scale charges for the two categories. Alternatively, to keep it simple, the higher of the scales can be used instead of apportioning
- If an incorrect rate has inadvertently been used, then a correction should be made on the next VAT return. However, if the cumulative error comes to more that £2,000 of VAT then a special declaration to HMRC must be made
- Remember, if it is wished to claim the VAT on all business fuel paid for by an employee and reclaimed from the company, then the company must have specific evidence of the VAT incurred by the employee - see Topical Tips 77
Topical Tips is designed to be a simple and useful source of ideas and information for clients and contacts of Barnes Roffe LLP. If you are unsure about the implications of any idea contained therein please contact your Barnes Roffe LLP partner. Barnes Roffe LLP cannot take responsibility if the ideas are implemented without its involvement.
