Reclaiming VAT on Fuel & Petrol: How It Works

reclaiming vat on fuel

Your business expenses are fully recoverable from HMRC in the form of VAT refunds. However, it is not as simple as it appears to be. The reason is the tricky and complex part of the VAT refund when your business is providing vehicles to their employees for business use. Similarly,  the process of reclaiming VAT on fuel is a bit confusing.

If your employees, or you as a self-employed person, are using the vehicles for business use and for personal travels also. Then, you should be careful about the VAT on fuel and petrol. You might overpay or get a fuel refund from HMRC.

In this blog, we will discuss what VAT on Fuel and petrol is and how it works for businesses and for self-employed persons. How much you can reclaim VAT on fuel is also a part of this discussion. So, let’s dive into this informative article!


Reclaiming Vat on fuel or other motor expenses might sound exciting, but it can be tricky for some people to reclaim it. 


VAT on Fuel and Petrol

On your tax returns, you add certain types of VAT  for the purpose of reclaiming them from the HMRC. You have to add all the VAT you have charged your customers with. Moreover, you will also add the details about all the VAT you have paid. Your VAT returns will consist of the difference between the two of them.

As a business owner, you may provide certain benefits to your staff like free fuel to your employees for business purposes only. However, if you provide this benefit for business purposes as well as for personal use, then calculating VAT becomes complex.

HMRC requires the businesses to maintain an accurate and complete record of all the fuel charges for the employees to reclaim VAT on those business expenses. This process could be tiring and requires a lot of effort and time to complete precisely and flawlessly.


What is Fuel Scale Charge and How Does It work?

Fuel Scale Charge is used when you are providing fuel for the business as well as for personal use. So, HMRC asks the businesses to provide details about the business use and the personal use of the mileage covered.

It provides a fixed amount based on the Carbon-dioxide (CO2) emissions of the vehicles on the free fuel benefit. This calculation helps in segregating the business use of fuel from that of personal use.

On the other hand, if your business is on a VAT Flat Rate Scheme, the VAT refunds are not applicable. VAT Flat Rate Scheme means your company has a VAT turnover of £150 000 or less than this.

In this method, the companies provide their employees with a fuel card. It helps in calculating the VAT on fuel used only for personal use. The main reason behind this is to simplify the process of calculating VAT for business and for personal use separately.

For business purposes, the VAT is 100% and can be reclaimed.


How Much Can a Business Reclaim VAT on Fuel & Petrol?

A business can reclaim 100% fuel VAT if they are providing fuel benefits free of cost for business purposes only. As a self-employed person, you can also reclaim the VAT from HMRC if you are using the vehicle and the fuel for the business only.

As discussed above, a full-scale charge allows 100% fuel VAT refundable by the HMRC. The Vat cannot be reclaimed for personal use.

If you want to claim VAT on business mileage, the process will be slightly different. For example, you can reclaim 100% VAT on business mileages, if you maintain a proper record of all your business trips and the fuel used for them. To avoid the hassle of keeping records, you can apply for VAT relief up to a certain amount like a Flat Rate Claim.

However, the circumstances and process are completely different in a situation when you don’t want to claim to avoid the complex and burdensome task of maintaining records for a long time. On the other hand, the VAT reclaimed is too low to claim.


The Bottom Line

The lengthy and cumbersome task of bookkeeping for recalling VAT in fuel and petrol is what many businesses shy away from reclaiming them. But it could be beneficial if you spend a lot of money on providing free fuel to your employees and staff members for the purpose of business.

So, you need to maintain a proper record of the previous four years as you cannot reclaim VAT on fuel expenses beyond a period of four years. You can use Fuel Scale Charge and Flat Rate Claim to make your task of calculating VAT on fuel convenient and more manageable.


You might have missed most of your VAT refunds from HMRC. If so, get instant help from the taxation experts at AccountingFirms who will help you calculate accurate VAT on fuel expenses.


Disclaimer: All the information provided in this article on Reclaiming VAT on Fuel, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.