It’s that time of year when HMRC publishes the VAT fuel scale charges for the next 12 months. The new rates can be found herewww.gov.ukand must be used for your first VAT period beginning on or after 1 May 2023.
The new rates must be used for your first VAT period beginning on or after 1 May 2023 to account for private consumption of fuel on business vehicles.
When determining the correct road fuel charge to use on your VAT return, you will need to check a vehicle’s CO2 emissions and the length of your VAT accounting period.
Where a vehicle’s CO2 emissions figure is not a multiple of five, you should round it down. If the vehicle is bi-fuel and has two CO2 emission figures, use the lower of the two.
Keep your calculations under review
Accounting for fuel scale charges can sometimes become too routine, however, and it is easy to fall into the trap of using the same figure every month or quarter.
In addition to updating your calculations for rate changes, you also should keep reviewing the vehicle details that form the basis of your calculations, as these obviously change as different vehicles come into stock.
Should you be using the fuel scale charges?
Motor dealers often forget why the scale charges are necessary in the first place.
The calculation is only required where fuel on which the business has reclaimed input VAT is supplied for private use. Many automotive retailers are now withdrawing fuel benefit from staff, which would also remove the need to account for VAT fuel scale charges.
Technically, even if you do provide fuel for private use, there are two alternatives to scale charges which could be adopted:
Keep mileage logs and only claim input VAT on the cost of fuel used for business purposes
Don’t reclaim any input VAT on fuel
From my discussions with dealers, the first option would necessitate very onerous record-keeping requirements which may not be adhered to, and the second would be way too costly in terms of lost VAT recovery. Therefore, fuel scale charges would still seem to be the best choice for motor retailers.
The 2023 VAT fuel scale charges can be found here.
If you have any questions on this or any other automotive VAT matter, then please contact me at michelle.malone@armstrongwatson.co.uk
