What is it?
The VAT Fuel scale charge is an adjustment that you add to your VAT return to account for the private element of fuel paid for by the business.
HMRC update the fuel scale charge valuations annually on 1 May.
Who is it for?
VAT registered businesses who reclaim input VAT on all road fuel costs, but incur a mixture of business and private mileage. The fuel scale charge does not need to be applied where no private mileage occurs.
VAT registered businesses using the VAT flat rate scheme are not eligible for this adjustment as they cannot reclaim input VAT on road fuel.
How does it work?
VAT incurred on road fuel costs are reclaimed in full (provided a valid VAT receipt is obtained) but an adjustment is then applied to the VAT return to account for the private usage. As this is a pre-determined amount set by HMRC there is no requirement to keep a separate record of any private usage.
The adjustment is based on the CO2 emissions of the car.
What should I do next?
Consider if applying the fuel scale charge is the right method for you? It is important to monitor your fuel costs, if they are low the fuel scale charge may be greater than the amount of recoverable VAT on road fuel. If this is the case you may wish to consider an alternative option of reclaiming VAT based on detailed business mileage claims.
To apply the fuel scale charge to your VAT returns, you will need to:
- Keep a copy of all fuel VAT receipts
- Confirm the cars CO2 emission (details of this can be found in the vehicle log book)
- Identify the correct fuel scale charge on the Gov.uk website. The relevant charges are broken down into VAT accounting periods (i.e. quarterly, monthly or annually.)
- Include the adjustment on the VAT return: The fuel scale charge is included in box 1 (output VAT) and box 6 (sales) on the VAT return.
- Review the fuel scale charge on the government website annually for increases
If you need further assistance, or simply want to know more, reach out to one of our VAT experts.
