FLEETS have welcomed a move this week that will allow them to continue to reclaim VAT on fuel bought by individual drivers.

Companies had previously been warned that they would be unable to reclaim VAT on fuel bought by employees for business use under rulings of the European Sixth VAT Directive unless the company was invoiced for that fuel directly, such as when drivers used a fuel card or company credit card.

But HM Revenue & Customs (HMRC) has introduced new legislation that allows companies to continue to claim VAT on fuel bought by their drivers providing they have a VAT receipt for every fill-up made.

Receipts must meet or exceed the value of the fuel bought and the value of the fuel being reclaimed, irrespective of how the mileage reimbursement is calculated.

A spokesman for fleet managers’ association ACFO commented: ‘We welcome the fact that HMRC has been able to find a way to comply with the ruling without ending the UK’s well-established business practice for UK recovery on fuel bought by employees and used on business trips. We have always stressed in our discussions with HMRC the importance of keeping compliance costs for businesses to an absolute minimum with any new administrative procedures.

‘We are pleased that the new rules meet that requirement for the majority of businesses as drivers, when they fill their vehicles up with fuel, should already be obtaining VAT receipts to present to their employer to support their mileage expense claims.’

John Lewis, director general of the British Vehicle Rental and Leasing Association (BVRLA), said: ‘The BVRLA is pleased to have worked with HMRC on the difficult issue of reclaiming VAT on privately bought fuel used on business.

The common sense solution proposed by Revenue & Customs to what would have proved to be a major problem for business, is welcomed by us on behalf of the industry’s customers, although the practical details of implementation still have to be fully resolved.’

Robert Pieczka, product and marketing director at fleet and fuel management company Arval, said the announcement was welcome in that it provided clarity for UK businesses after a period of uncertainty.

He said: ‘However, we remain concerned that many UK businesses do not have proper control over their fuel purchasing arrangements, despite the fact that over the last six months corporate fuel bills will have increased at three times the rate of inflation.’

One industry insider, who asked not to be named, said they believed the move effectively means it is business as usual for fleets, and that they will not be vigorously chased for receipts.

A spokesman for HMRC added: ‘We are not insisting that drivers have every single VAT receipt. They just need receipts for the business mileage that they have done.’