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Can you reclaim VAT on fuel?

Can you claim VAT on fuel?
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    As a business owner, you may have certain expenses that are tax deductible. One of these is the fuel you use for your business. If your company uses fuel to operate, you can reclaim the VAT on it by completing the right paperwork.

    However, if you use fuel for private purposes as well as professional ones, then you won’t be able to reclaim VAT on that amount – unless it’s used for purely business purposes, and there’s no way any private miles could be included in the calculation

    At WIS Accountancy, our VAT Accountants will take you through how you can go about reclaiming VAT on the fuel you use for your business.

    What are the steps to claiming VAT on fuel?

    So, can you reclaim VAT on fuel? The short answer is yes, but there are limitations to consider. You can only reclaim VAT on fuel if you use it for business purposes only.

    This is known as ‘exclusive use’ and means that the fuel cannot be used for private use. If you don’t use your vehicle exclusively for business, then you cannot claim any of the costs associated with driving your car, including fuel costs and repairs.

    To work out whether you have exclusive use of a vehicle, HMRC will look at all the circumstances surrounding its use. They will assess whether the vehicle was:

    • Used only for business purposes; or

    • Partially used for both business purposes and private purposes; and

    • If there’s no doubt about how much was used for both types of purpose; so that it can be determined what proportion must be attributed between them

    You must keep accurate records of the fuel used so that HMRC can check it

    In order to claim back VAT from fuel expenses, it’s important that you have documents to prove how much fuel you used for business purposes. You must also show that you kept accurate records of the fuel used so that HMRC can check it.

    To do this, it’s helpful to keep a record of the following:

    • The amount of diesel or petrol bought and how much was used in each journey.
    • The date when the fuel was purchased.

    HMRC will accept a ‘fuel scale charge’ form as sufficient evidence of business use if there are no private miles recorded. This is a form that you can download from the HMRC website and fill in or have completed by your dealer on the purchase or delivery of the vehicle. If you opt for this option, keep it with your records for at least 5 years.

    An approved ‘mileage log’ is required for any private mileage

    You must keep a mileage log for all private mileage, which means the number of miles travelled in a vehicle that is used for business purposes.

    You can use the same log for all your vehicles if they are driven by employees or have been provided to you by your employer (for example, company cars).

    The log must be kept for at least six years after the end of any Vehicle Excise Duty (VED), the tax year in which there was any private use. You may also be asked to provide it at any time during those six years if requested by HMRC.

    Can unused fuel be reclaimed for VAT?

    In order to reclaim VAT on fuel, it must first be unused. If you have used the fuel for business purposes, then you may not be able to reclaim VAT on this.

    The following are examples of how you can use your fuel:

    • Driving a car as part of your job (e.g., being a delivery driver)
    • Using it to power machinery in an industrial process (e.g., manufacturing)

    You cannot reclaim VAT if it is for partly private use without any business use

    If you only use your vehicle for business and no private use, then you can reclaim VAT on fuel. However, if you use it partly for private and partly for business purposes, you cannot reclaim VAT on any of the cost or lease payments.

    You can only claim a partial repayment of VAT made on motor fuels if:

    • The fuel is used exclusively in a trade or profession. This means that it must be used wholly (100%) in one particular trade/business activity if you have more than one; or
    • A percentage of its total use is within a single trade/profession – but not necessarily 100%. For example, if 20% of your driving was done purely for personal reasons (e.g., going to see friends or going shopping), then this would mean that 80% was undertaken strictly within the scope of your work as an employer using company vehicles. You could then claim back 80% of any fuel costs associated with those journeys as long as those costs were incurred under normal day-to-day activities within your job role; or
    • If there were two separate vehicles bought specifically for different jobs – both at once perhaps – each individual vehicle must meet these requirements individually, too, before they could be claimed against tax reliefs paid out by HMRC

    FAQs

    Can you claim VAT on fuel and mileage?

    You can’t claim Vat on total mileage as it only focuses on the fuel element of that mileage. This is known as the advisory fuel rates and they factor in the type of fuel you use, such as petrol or diesel.

    Can I claim petrol costs as a sole trader?

    Yes, sole traders can make a claim on petrol costs with a mileage allowance of 45 pence for the first 10,000 miles, then 25 pence thereafter. Or if you use a motorbike for business purposes it’s 24 pence per mile.

    What is the VAT on fuel?

    Fuel duty tax is implemented into the price you pay at the pump for petrol or diesel. There’s also the standard 20 % VAT rate for most fuels, with the exception of domestic heating fuel.

    Conclusion

    Fuel is a taxable commodity and can be reclaimed by businesses. The business must show that the fuel has been used for business purposes only and keep records to prove it.

    If you’d like help making VAT claims for fuel or if you require assistance with other tax advisory services, please contact our team at WIS Accountancy today.

    Want to learn more about VAT on business vehicles? Read our blog all about claiming VAT on business cars here.

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