VAT on fuel & business mileage in 2023

ByShane Roe

VAT ON FUEL: The payment you pay for fuel like petrol, diesel, or any other type of lubricant for heating vehicles includes a percentage of tax, called Fuel Duty. This type of VAT is implemented in almost all VAT-observing countries.

However, the tax is paid on different levels. However, the charge is spent on different levels. For example, in the Vat UK, fuel used for vehicles consists of a tax of 20%. In comparison, fuels purchased for domestic use have a reduced rate of 5%.

vat on fuel

 Why is VAT on fuel & business mileage so important to discuss?

VAT – (Value Added Tax) on fuel every mileage can cost the business entity significantly. Imagine you have given your 100 employees a vehicle for work use. You are responsible for the tax paid on fuel used in those vehicles. With every mile the vehicle cover, your tax is increasing. So that would make up to a tremendous amount, which isn’t very suitable for the business to pay, right?

Therefore, to save you from the haphazard, certain factors hold the basis of Vat fuel duty overall the countries. Whichever is your country, if you learn those factors, you’ll grasp the whole fuel duty structure.  Some of those factors are mentioned below with details to give a scenario image of what is significant in this regard.

With the UK’s example, VAT reclaims on fuel and mileage is a strategy presented by HMRC. This allows you to recover all your VAT paid for commercial use. But there are specific terms and conditions regarding reclaim.

Conditions to Reclaim VAT:

  • First of all, this service requires you to prove that the vehicle is solely for commercial purposes. That means there are no private trips made on the vehicle. If you’re ready to do that, then you can reclaim 100% of the VAT paid.

If you are using the vehicle for both work and home necessities, which is quite very reasonable, then there are two choices:

  • Either claim VAT paid for work and then cleared the VAT’s rest according to the fuel scale charge.
  • OR do not claim at all if you think the work mileage is too low, and you would have to pay somewhat more in that case.

Now, fuel scale charge is a scale that relies upon the CO2 emission of the vehicle and the type of vehicle driven for private use. It is a more straightforward way to account for personal use taxes and the return on professional service. According to the VAT period, the fuel scale charge calculates VAT on the above-mentioned two bases and adds up the fixed sum to the total VAT output.

If you think your personal use would turn out higher, using this scale is expensive for you.

The Four-Years-Rule:

HMRC gives this flexibility to its tax-payers. If they can collect all the necessary receipts and documental formalities, unclaimed VAT can be claimed back on every business trip paid in a period of four years.

Claiming back VAT would prove beneficial for your business, but you have to use the schemes and strategies wisely. Otherwise, instead of boosting your revenues, the reclaims would cost you.

FAQS

How do you work out VAT on fuel?

To calculate VAT on your own, you have to consider some of the factors:

  • The car you drive.
  • If you are using any particular scheme, the flat rate is applied or not?

Generally, at a standard rate, you have to remember one equation, and that is 12 divided by 1/6 => 2p. Apply this on every mile you travel. For example, that makes £20.00 on 1000 miles.

Can I claim 100% VAT on fuel?

You can claim 100% VAT only if you have dedicated the vehicle for commercial use. Naturally, it this humanly impossible not to use the same car at home. So, this can be done if you drive a taxi or a school bus. In such instances, 100% VAT can be claimed back.

How often can I claim back VAT?

According to the rule, VAT can be reclaimed in a period of four years after registration to VAT. In comparison, the purchases you made before registering for VAT can also be taken into account.

Do I need fuel receipts to claim mileage?

At a standard rate, Yes! You’ll have to prove the mileage covered for business use to reclaim VAT. However, if you are entitled to a flat rate scheme, there’s no need for any receipts.

Visit our Online VAT Calculator for all the vat calculations. It includes most countries in the world like, Ireland, South Africa | Germany | Philippines | Malta

 

Shane Roe
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