Claiming VAT on mileage is a benefit you should only take advantage of if you provide free fuel to employees (for both business and personal use) and reclaim all of the VAT on that fuel. This is done under a scheme called the “fuel scale charge”.
You shouldn’t use the fuel scale charge for your company if:
- you provide free fuel to your staff and you reclaim NONE of the VAT on the fuel,
- you reclaim VAT only on the fuel used for business reasons
- your staff fully pay you back on their private mileage.
How does the fuel scale charge work?
The scheme was launched to make accounting for VAT on the private use of fuel by car drivers simple. It adds back a fixed sum per VAT period to make up for the private consumption of fuel.
The scale charge is based upon a car’s carbon dioxide (CO2) output. You must only use one scale charge for each car where there is private usage.
Smart Team tip – if your car has two CO2 outputs listed, you can use the lower amount for the fuel scale charge.
VAT fuel scale charges 2017/2018
The following tables contain all the figures you need for the Fuel Scale Charge whether your business accounts for VAT on an annual, quarterly, or monthly basis.
Annual VAT fuel scale charges 2017/2018
|CO2 band||VAT fuel scale charge, 12 month period
|VAT on 12 month charge (£)||VAT exclusive 12 month charge (£)|
|120 or less||£563||£93.83||£469.17|
|225 or more||£1,969||£328.17||£1,640.83|
Quarterly VAT fuel scale charges 2017/2018
|CO2 band||VAT fuel scale charge, 3 month period
|VAT on 3 month charge (£)||VAT exclusive 3 month charge (£)|
|120 or less||£140||£23.33||£116.67|
|225 or more||£492||£82||£410|
Monthly VAT fuel scale charges 2017/2018
|CO2 band||VAT fuel scale charge, 1 month period
|VAT on 1 month charge (£)||VAT exclusive 1 month charge (£)|
|120 or less||£46||£7.67||£38.33|
|225 or more||£163||£27.17||£135.83|
How to claim the Fuel Scale Charge on your VAT return
The fixed charge is added to the output VAT figure in your return.
You do this by adding the “VAT on 1/3/12 month charge” figure – that’s the third column on the tables above – to box 1 of your VAT form.
Then you add the amount shown in the “VAT exclusive 1/3/12 month charge” cell – that’s in the fourth column in the tables above – to box 6 of your VAT form.
Smart Team note – if your business is on the VAT Flat Rate Scheme, you can’t claim VAT on fuel and the fuel scale charge does not apply. That’s because your input VAT is automatically adjusted as part of the flat rate percentage.
Is the VAT Fuel Scale Charge worth it for your business?
If your staff member’s private mileage is very low, you may wish to account for VAT based on the exact business mileage – more on that later just below.
Your employees will have to keep hold of all receipts as, without them, HMRC may deny your claim. This may prove tricky for your staff to keep on top of.
Would it be better for pay only for staff business mileage?
Your company can use Mileage Allowance Payments (MAPs) to pay employees for using their own vehicles for business-related journeys. Your staff member can use more than one vehicle in a year for this benefit – just add up the mileages of all cars used during the period.
You can claim up to an “approved amount” – to work out the approved amount, you multiply your staff member’s annual business mileage by the applicable rate per mile.
For 2017/2018, the current rates per mile are:
|Type of vehicle||First 10,000 business miles in the tax
|Business miles in excess of 10,000 in
the tax year
|Car and van||45p per mile||25p per mile|
|Motorcyles||24p per mile||24p per mile|
|Bikes||20p per mile||20p per mile|
Let’s say that your staff member’s approved amount is 15,000 miles. Their approved amount for the year that you could pay them would be 45p for the first 10,000 miles (£450) plus 25p for the subsequent 5,000 miles (£112.50) totalling £562.50.
For any amount below the approved amont, your staff member can claim tax relief (Mileage Allowance Relief) on the unused part of the approved amount. You can report unused balances to HMRC under the Mileage Allowance Relief Optional Reporting Scheme (MARORS) – click here to find out more.
If your employee goes over the approved amount, use form P11D to add anything that’s above the approved amount to your staff member’s pay. Then you can deduct and pay tax as normal.
Claiming back VAT on fuel used in Mileage Allowance Payments
You can claim VAT back on the fuel portion of Mileage Allowance Payments. There is a simple formula to working out what the VAT element is.
First, to do that, we need the current applicable rates published by HMRC –
|1400cc or less||11p||7p|
|1401cc to 2000cc||13p||8p|
|1600cc or less||9p|
|1601cc to 2000cc||11p|
Let’s assume that your staff member has a petrol car that’s over 2,000cc.
For this car, you can claim back 21p per mile for the Mileage Allowance Payments, whether they’re being paid at 45p or 25p.
To find out the VAT, multiply the 21p by 1.2 to find out the VAT exclusive figure. This gives you 17.5p. Subtract 17.5p from 21p and this is the VAT element – 3.5p.
That means you can claim back 3.5p per mile that you staff member travels, equivalent to £350 for every 10,000 miles.
Which is better for your business?
For this example, let’s consider the BMW 530i SE 4dr Auto model.
This is a petrol car with an engine size of 1998cc and 132g/km CO2 emissions.
Under the annual fuel scale charge where you’re paying for your staff member’s business and private petrol usage, you can claim back £150.17 in VAT.
If you were only paying for business mileage under the Mileage Allowance Payment scheme, the VAT you could claim back per mile on 11p is 1.8p.
Considering only VAT and no other costs, it would be better to use the Fuel Scale Charge for the first 8,342 miles as you could claim back more VAT. Past that mileage, your company can claim more VAT under the Mileage Allowance Payments scheme.
If your staff member did 20,000 miles per year, the VAT you could claim back is £360, significantly more than the Fuel Scale Charge.
Get Smart Team to help
For all matters related to your business and cars, including the Fuel Scale Charge and Mileage Allowance Payment, get in touch with Smart Team.
Call us on 01202 577500 or email us at [email protected].