Fleet News

New rates will simplify recovery of VAT, claims Customs & Excise

CUSTOMS & Excise has announced new VAT rates for employers to apply if they give company car drivers free fuel for private motoring.

The rates apply to the fuel scale charge and are designed to simplify VAT recovery. In theory, companies can only recover VAT on fuel purchased for business use, which would require detailed record-keeping when drivers also have free fuel for private journeys.

However, the VAT fuel scale charges provide an alternative whereby businesses can apply a fixed VAT charge rather than an actual, painstaking calculation on each petrol or diesel invoice. The VAT fuel scale charge acts as a surrogate figure for the VAT that should be 'blocked' because it was charged on fuel bought for company car drivers' private motoring.

So employers can recover VAT in full on all fuel purchased, but then have to account for output VAT on the scale charge at a fixed rate according to each company car's fuel type and engine size.

The new rates, which come into force on May 1, are printed below and represent a reduction of 6% for diesel vehicles and 7% for vehicles using other fuels, following fall in road fuel costs since last year.

New VAT rates

Vehicle: 12 month (£)/ 3 month (£)/ 1 month (£)
Diesel
2,000cc or less: £850.00/ £212.00/ £70.00
More than 2,000cc: £1075.00/ £268.00/ £89.00

Any other engine:
1,400cc or less: £905.00/ £226.00/ £75.00
1,401 - 2,000cc: £1145.00/ £286.00/ £95.00
More than 2,000cc: £1690.00/ £422.00/ £140.00

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