Rising pump prices have added over £100,000 to the cost of running a 500-car fleet since January last year, reports TMC.

In addition, the new VAT rate of 20 per cent will raise such a fleet’s fuel VAT bill from £122,000 to £136,000 in 2011, even if underlying fuel prices stay level, said Paul Jackson, managing director of the mileage and fuel cost management company.

“Unfortunately, oil prices are set to keep rising in the first half of the year. Petrol retailers are predicting that diesel will hit £1.40 per litre by April,” he said.

“Obviously, businesses need to recover every last drop of VAT on business fuel. The HMRC VAT scale charges are often not the most efficient method, while more potentially reclaimable VAT is often lost because drivers fail to retain receipts when they fill up.”

To help fleets maximise their VAT recovery on business fuel, TMC, whose cost-saving Mileage Audit system already encompasses over 100,000 drivers, has published a free four-page guide covering all the options for reclaiming VAT.

The guide clearly explains the VAT recovery options available to fleets. It sets out the pros and cons of the two most widely-used methods of reclaiming VAT – using the HMRC scale charges or reclaiming the exact amount of VAT based on mileage records – with worked examples. It also explains how fleets can fully recover VAT without the need to submit forecourt till receipts.

Fleets can order a copy of the guide by calling 0843 222 6000.

Jackson said: “In our experience, fleets are increasingly turning to reclaiming VAT based on mileage returns because it is easy to end up under-claiming if one relies on the scale charges.

“It is extremely important to maintain accurate, audited mileage records in any case, as has been shown by recent cases where businesses were hit by large fines after an HMRC investigations revealed ambiguous or incomplete record-keeping. Whatever method fleets decide to use, it's now more important than ever to ensure that they recover all the VAT on fuel.”