Getting back the VAT from your spent fuel can make your business more economical. Even so, you need to know about HMRC guidelines and have strong records to comply with the process. This guide explains in detail what VAT is on fuel. And can you claim VAT on fuel for business use?
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What is VAT on Fuel?
What is VAT on fuel, and can you claim VAT on fuel for business use? You can reduce your VAT expenses by reclaiming VAT on fuel if your business is registered. Still, there are exact rules and evidence-keeping obligations to maintain compliance with HMRC. You must be VAT registered for your business to be able to claim back VAT on fuel. If your yearly taxable earnings pass £90,000, you will have to register for VAT. If you are below the limit, you are allowed to sign up for VAT voluntarily. Yet, you cannot recover VAT on fuel within the VAT Flat Rate Scheme.
Can you claim VAT on Fuel for Business Use?
You can claim back all the VAT on fuel you use for business activities, as stated by the HMRC. To be within HMRC guidelines, you are required to note down every mile of your business journey and keep your fuel receipts as proof. If using fuel for business, you can reclaim VAT as long as it’s for business purposes only. Yet, when people use their vehicles for both their company and private needs, it makes it difficult to claim back VAT on fuel.
You can reclaim VAT on fuel in two different ways.
- You can get a refund for VAT on fuel you buy and pay the correct fuel scale charge based on your vehicle’s type.
- Make sure mileage data from your car is kept detailed, so you can use this information to claim VAT only for fuel used while on a business trip.
All fuel purchased for business use in your company car can be reclaimed on VAT, even for personal trips. After that, you will be asked to pay a fuel scale charge to cover the personal miles, so you don’t have to log each journey.
- You can reclaim the VAT on all fuel you use for your vehicle.
- You can calculate your VAT fuel scale charge using the web or mobile version of HMRC’s VAT fuel scale tool.
- List the fuel scale charge when submitting your VAT return.
But when your fuel usage isn’t high enough, the VAT you’ll pay might be more than what you recover, so this choice may not work for businesses that use very little fuel.
Vehicle Types and VAT Reclaims
Can you claim VAT on fuel for business use? But before claiming VAT, you have to be clear about the vehicle type and VAT reclaim on it. All stages of the process charge fuel with the 20% VAT. How much VAT can be deducted from fuel is determined by the type of car and the mileage set by HMRC.
New Cars
If you prove business trips are the reason for all the driving, you could receive back all the VAT paid on fuel when a new car is bought. It is mandatory for you if you manage a taxi business or work as a driving instructor.
Leased Vehicles
A leased car allows you to claim back up to 50% of the VAT on fuel. If it’s certain the vehicle is for business and not private use, you can typically claim back all VAT on the fuel.
Hire Cars
You may claim the full VAT amount if you hire a car for work for a few days and drive it mainly for business trips.
Commercial Vehicles
VAT can be recovered when renting a truck, van, or tractor. It is also possible to recover VAT on the following commercial vehicles:
- Car-derived vans
- Caravans
- Motorcycles
- Motorhomes
- Vans that include rear seats
Trying to do this can be a little challenging. That’s why some people and business owners decide not to claim back their fuel costs. Still, it is useful when you invest the time in managing your records.
Can you Claim VAT on Fuel if it is Partly for Private Use?
Can you claim VAT on fuel for business use if it is also partly used for personal work? If you don’t use your vehicle personally and only for work, you can claim back VAT on the fuel. When you use part of your car for business and part for personal reasons, you lose the right to recover the VAT on either payment.
You may only claim part of your VAT paid on motor fuels if the following applies:
- The fuel is available only for use in that person’s business or job. Therefore, you are required to use all of it in just one trade or business when you operate several.
- Although a lot of its use is part of a particular trade/profession, it shouldn’t be restricted completely in this way. In other words, if 20% of all your driving was personal, the remaining 80% belonged to your company and was for employment purposes. Should your employer cover your travel costs and you’ve spent on fuel, you can get 80% of your expenses back, as long as you didn’t engage in unusual work activities.
- If you use separate cars for various tasks, all owning them together, every vehicle must meet its required conditions before HMRC approves any tax relief
Conclusion
Here is all the required information on the topic Can you claim VAT on fuel for business use?’ Recovering VAT you pay for business-used fuel makes your running costs much lower. Even so, you must follow the HMRC rules, maintain accurate books, and separate business and non-business activities. If you use a company car, hired vehicle, or commercial truck, knowing about VAT reclaim rules and fuel scale charges helps you keep your business compliant and select the best tax advantages.
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