Currently, UK businesses can reclaim the 17.5% VAT on all fuel bought for business trips.
However, under the new directive this will only be possible when the company is invoiced for that fuel directly, such as when drivers use a fuel card or company credit card.
No reclaim will be possible if employees buy the petrol themselves and later claim it back on expenses. Officials at HM Revenue & Customs have vowed to work with fleets to ensure they are not swamped with red tape during the overhaul (Fleet NewsNet, August 25).
But they stress the decision of the European Court of Justice ruling that found the UK in breach of the European Sixth Directive must be followed and will now consult businesses about how this is to be done.
Fleet experts say companies should at least prepare themselves for a serious review of how they buy fuel.
A survey carried out by vehicle management firm LeasePlan showed that even among large fleets that are aware of the directive, almost one in five (18%) has still not done anything about it.
LeasePlan says that a fleet with 150 diesel cars, each doing 10,000 business miles a year at 45 mpg, would find its annual fuel bill going up by almost £24,000 if it can no longer reclaim the VAT.
LeasePlan UK’s commercial director Tim Hudson said: ‘Managing fuel costs is vital, with oil prices in the stratosphere and both petrol and diesel averaging more than 90 pence per litre.
‘For many fleets fuel is the second biggest fleet cost after vehicle depreciation, so anything that adds to the burden must be analysed and managed.
‘In the event that the directive becomes UK law, taking action such as introducing fuel cards will prevent firms losing out financially every time their employees fill the tank.’
HM Revenue & Customs has not revealed when or how UK businesses will be expected to overhaul their pay-and-reclaim systems.