You may be able to claim back the VAT your business pays on vehicles and the fuel they use. As you might expect though, there are all sorts of rules and requirements, so we’ll go over the rules around reclaiming VAT you pay on fuel in your business.

How to work out how much VAT your business can reclaim for fuel

A business can only reclaim VAT it pays on fuel for journeys which relate wholly and exclusively to business, so working out your claim is a lot easier if the vehicle is used solely for business purposes.

It’s a bit more challenging if you use the same vehicle for both business and personal trips though. When this happens, you’ll need to decide how you want to work out the VAT on the mixed-use fuel. There are different options, so the best fit for you depends on how you use your vehicle, and who owns it.

• Company vehicle with private use: You could either reclaim all the VAT and then apply the VAT fuel scale charge, or you could claim the VAT which relates to business mileage only
• Driver uses their own vehicle: Reimburse the driver and then reclaim the VAT on the fuel element

We’ll go into these in more detail below.

Reclaiming all the VAT and then using the VAT scale fuel charge

The fuel scale charge is based on the emissions of the vehicle you’re using. In this case, the company claims for 100% of the fuel it buys for its vehicles so it gets everything back, but then adds the fuel scale charge to the same VAT return as an amount it owes. There’s a handy calculator on HMRC’s website which makes it a bit easier.

The fuel scale charge tables show emissions figures in multiples of 5. If the car’s CO2 emissions figure is not a multiple of 5, then it’s rounded down to the nearest multiple of 5 for those purposes.

The scale rate isn’t affected by the number of miles which are driven, so this may be a better option for some companies. Unlike many HMRC rates and allowances, the fuel scale charge gets updated regularly, so it’s vital to make sure you are always using the latest rate!

Reclaiming VAT on the actual cost of buying fuel for your business

Another option for reclaiming the VAT on the fuel used in a company car is working out the proportion of fuel which actually relates to business purposes. You’ll need to keep very detailed records so you can work out the split between your business miles and any personal journey. For example, 80% of your total mileage is for business, so you’ll be able to reclaim 80% of the VAT your business paid for fuel in that vehicle.

Reimbursing someone using their own vehicle and then reclaiming the VAT

You can reimburse the driver using HMRC’s Advisory Fuel Rates and then reclaim the VAT on the fuel element. These are a fuel-only rate (unlike Mileage Allowance Payments which cover things like wear and tear on the vehicle) and they are adjusted depending upon the size of engine and type of fuel used.

Alternatively, the company could pay for the fuel (for instance, with a fuel card) and then charge the employee for the number of private miles they do, claiming VAT on the cost of the fuel minus the employee contribution.

What if I just don’t claim any VAT on my fuel?

The final option is to decide not to claim back any VAT at all. For example, if your business doesn’t own any vehicles so it hires them, or if the vehicle it owns doesn’t travel many miles each year, you might simply decide the time it takes to calculate the VAT is actually worth more being spent on something else!

What method should I use?

Consistency is key when it comes to fuel VAT claims, and you must use the same basis to calculate your mileage rates across all of your vehicles.

That means you can’t decide to use the scale fuel charge on delivery vehicles, and then not bother to calculate the fuel figures for a car. It’s why it’s so important to choose a method which is right for the whole company, and not just one individual or a particular vehicle.

 
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