Are you Paying Too Much VAT on Fuel?

The application of VAT law has been done incorrectly by HMRC. The law states that how much VAT is payable where businesses pay for fuel used for private mileage.

The VAT rules are based on the European legislation. However, HMRC has the power to modify these VAT laws as long as he gets permission from the EU first. One of these so-called VAT rules talks about car and other vehicle fuel paid for by businesses.

Where your business pays for fuel and some is used for purposes linked to non-business travel for example, employee’s home-to-work journey, EU rules states this counts as a supply of goods on which VAT is due. Trying to identify the cost of the non-business fuel would involve keeping a log of all private journeys. To avoid this fiddly record-keeping “”the Taxman’s derogation allows your business to, instead, pay a road fuel scale charge (RFSC) to cover the private use.

Income tax perspective

Many businesses now wants their workers to reimburse the cost of fuel used for private journeys so that a benefit-in-kind income tax and NI charge is avoided. To do this the workers need to keep a record of their private mileage.

As always, the law on VAT is complicated and very confusing. If you are a small business owner and has just started your business, all this will seem very complicated.

The best thing to do is to get professional help. Contact your local accountant for VAT advice KVS Accountants has helped many businesses to overcome VAT problems in different complexities.

We act as accountants in Putney, Chelsea, Fulham, Southfields, Earlsfield, Wimbledon, Wandsworth, Barnes, Clapham, Kensington and Knightsbridge


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