Vehicles and the fuels they run on are some of the most intricate issues of VAT and tax. But, as with all tax law, just because it’s perplexing doesn’t mean you should disregard it!

So, in this piece, we’ll look at the topic of gasoline and automobiles, as well as whether or not you can claim back the VAT you pay to get from point A to point B.

The Golden Rule of 100% business use

The circumstance when you can claim back 100 per cent of the VAT you paid on petrol is perhaps the easiest. Keep in mind that you can only do this if the car was used exclusively for work.

This includes driving to and from work, therefore it would have to be left overnight at a depot or in the office parking lot. This is not impossible, despite how tough (and uncomfortable) it may be at times.

A company that fixes phone lines, for example, might have a specialized vehicle that transports and repairs telegraph poles. It’s a safe bet that this won’t be utilised to get the kids to school! In that circumstances, a claim for the full amount of VAT paid on fuel is likely to be accepted.

When a member of staff uses a corporate automobile, however, it can be difficult to persuade a tax inspector that no private trips are taken. If that’s the case, you’ll need to use one of the ways listed below.

Fuel & Vat – Actual use basis

When you provide company cars for your employees, you’ll be fine if you can show you only claim the VAT on fuel specifically for business purposes. Typically, this involves keeping petrol receipts and a mileage log showing the date, start and finish point, and total mileage.

You’ll need to make a payment for the fuel, but it is important to make sure that this is at a reasonable rate. Otherwise, you could end up with a Class 1 NIC liability.

Using advisory Fuel Rates             

The optimum time to do this is when HMRC publishes the Advisory Fuel Rates. These provide a standard quantity per mile that is changed based on the size of the engine and the type of fuel used.

The good news is that this applies to VAT on fuel used for business activities as well as when employees use company fuel for personal travel. Consider an employee who drives a company car and pays for gas:

  • The company can pay the advisory rate to reimburse the employee for the amount of fuel they use for business
  • And then claim back the VAT on the payment

Alternatively, the employer might pay for the fuel and then bill the employee for the amount of private kilometres driven, collecting VAT on the fuel cost less the employee contribution.

Fuel charge on a scale

The fuel scale fee is calculated based on the vehicle’s emissions. On the internet, there is a helpful calculator.

In this case, the company claims for 100% of the fuel it buys for its vehicles, but it also makes a deduction for the fuel scale charge.

Don’t Claim any VAT

The fourth option is to choose not to claim any VAT refund at all. This may seem absurd to many businesses, yet we are all unique.

A company may not own any automobiles and only hire a car once a year, or it may own a vehicle that isn’t used frequently.

In these situations, it’s likely that the directors will determine that the time spent calculating the VAT claim would be better spent on something else.

Maintain consistency in your fuel VAT claims.

When it comes to gasoline VAT claims, there is one crucial thing to remember, and it is especially important when it comes to the last point.

As a result, you can’t select to utilise the scale gasoline charge for delivery vehicles and then ignore the fuel statistics for a car. That is why it is critical to select a strategy that is appropriate for the entire organisation, rather than simply one person or one vehicle.