HMRC have issued details of the updated VAT fuel scale charges which apply from the beginning of the next prescribed VAT accounting period. Businesses must use the new scales from 1st May 2017.
The scale charge is calculated according to a cars CO2 emissions and the fixed charge is added to output VAT, on the VAT return. One scale charge must be used for each car that is put to private use, however, it may not be worth paying the VAT fuel scale charge, particularly if private mileage is very low. The alternatives are as follows:
- The business can account for VAT based on exact business mileage and therefore it will not claim VAT on any private mileage, or
- It may pay a mileage allowance for exact business miles travelled and reclaim back VAT on that: HMRC publish approved advisory fuel rates, which can be used to calculate the payments and the recoverable VAT, or
- A business may decide that it will not reclaim any VAT on fuel costs – this is where business mileage is very low and private mileage is high.
Annual VAT scale charge rates:
| Description of vehicle: vehicles CO2 emissions figure | VAT inclusive consideration for a 12 month prescribed accounting period (£) | VAT inclusive consideration for a 3 month prescribed accounting period (£) | VAT inclusive consideration for a 1 month prescribed accounting period (£) |
| 120 or less | 563 | 140 | 46 |
| 125 | 842 | 211 | 70 |
| 130 | 901 | 224 | 74 |
| 135 | 955 | 238 | 79 |
| 140 | 1013 | 252 | 84 |
| 145 | 1068 | 267 | 88 |
| 150 | 1126 | 281 | 93 |
| 155 | 1180 | 295 | 98 |
| 160 | 1239 | 309 | 102 |
| 165 | 1293 | 323 | 107 |
| 170 | 1351 | 337 | 111 |
| 175 | 1405 | 351 | 116 |
| 180 | 1464 | 365 | 121 |
| 185 | 1518 | 379 | 125 |
| 190 | 1577 | 393 | 131 |
| 195 | 1631 | 408 | 136 |
| 200 | 1689 | 422 | 140 |
| 205 | 1743 | 436 | 145 |
| 210 | 1802 | 449 | 149 |
| 215 | 1856 | 463 | 154 |
| 220 | 1914 | 478 | 159 |
| 225 or more | 1969 | 492 | 163 |
Tax traps: Mileage payments
Employers must ensure that employees submit fuel VAT receipts, providing that they have incurred costs on VAT fuel if they want to recover output VAT based on mileage payments. Without fuel receipts, HMRC may deny the VAT recovery on mileage reimbursements.
If you reimburse mileage at 45p and 25p, where employees use their own car, you cannot recover VAT on 45p/25p as this is supposed to represent the full cost of using the car: Including depreciation, fuel, insurance etc.
Instead you would only be able to recover VAT on the fuel element, using the advisory fuel rates or calculating your own fuel mileage rate, which would be subject to HMRC scrutiny.
