The result could have a major impact on companies that allow staff to buy fuel using their own cash or credit cards and then reclaim it.
Fleets have been warned that they may have to revamp their fuel policies or risk losing out on millions of pounds every year as they will be unable to reclaim VAT incurred from business mileage expenses. The Advocate General has asked the European Court of Justice to declare the UK in violation of the 6th VAT Directive.
The EC claims VAT is only recoverable when a transaction takes place between two VAT-registered companies.
However, if the proposal goes ahead and fleets implement a fuel card system straight away, it could actually benefit companies, says Steve Riggens, marketing manager at BP European Fleet Services.
He said: ‘If it goes ahead, there will be added costs for companies using a pay-and-reclaim scheme as they will not be able to reclaim the VAT.
‘But if fleets introduced a fuel card straight away, it could be a seamless process and would also give fleets the opportunity to examine fuel policies and procedures.’
John Brooke-Langham, head of product development at fuel card provider CH Jones, added that if the commission blocked VAT reclaims on business mileage, moving to fuel cards will give fleets more control. He said: ‘It will force fleets down the direction they are going anyway.
‘People are becoming more aware of the lack of control over purchases. ‘If staff are able to fill up anywhere, there are issues such as whether they are buying at a sensible price or whether they are sticking to one station for personal reasons such as using a loyalty card.
‘There are whole series of controls fuel cards can offer fleets.’