Claiming VAT on Fuel: UK Business Guide 2026/27

A VAT-registered business may reclaim VAT on road fuel used for taxable business activities, but a blanket “100% claim” is wrong where fuel also supports private motoring, exempt supplies or non-business use. The correct method depends on who owns the vehicle, who buys the fuel and whether the business pays for private journeys.

This guide reflects HMRC’s motoring-expense rules and the 2026/27 mileage rates.

Four ways to deal with VAT on road fuel

1. Reclaim VAT only on business fuel

If fuel is used solely for qualifying business journeys, a fully taxable business can normally reclaim the VAT supported by a valid VAT invoice. Keep mileage and journey records demonstrating that no private fuel is included.

2. Reclaim all VAT and use the fuel scale charge

Where the business pays for both business and private fuel for a car, it can normally reclaim the VAT on the fuel and account for output VAT using HMRC’s road fuel scale charge. The charge is based on the car’s CO2 emissions and the VAT return period.

If this option is used, HMRC normally requires it for every car in the business for which fuel is provided for private use. A scale charge is not required for a car that is not available for private fuel. Use the table applying to the relevant VAT period; the current collection includes charges from 1 May 2026 to 30 April 2027.

3. Apportion using detailed mileage records

Instead of a scale charge, a business can restrict recovery to the business proportion using reliable mileage records. For example, where 70% of recorded fuel mileage is business and 30% private, only the VAT attributable to the qualifying business element is reclaimed, subject to partial-exemption rules.

4. Reclaim no VAT on any road fuel

If business mileage is low, the fuel scale charge may exceed the recoverable VAT. A business can choose not to reclaim VAT on road fuel at all; it then does not account for the private-fuel scale charge. HMRC says this no-reclaim choice applies to all road fuel bought by the business, not selectively vehicle by vehicle.

Employees using their own vehicles

From 6 April 2026, the approved mileage allowance for an employee’s own car or van is 55p per mile for the first 10,000 business miles and 25p thereafter. Those Income Tax rates are not the amount of VAT that can be reclaimed.

For VAT, the employer calculates the fuel element using an appropriate fuel rate, applies the VAT fraction and retains VAT receipts covering the fuel purchased. The mileage payment must relate to actual qualifying business miles. Keep employee, journey, mileage and vehicle records.

Company cars and advisory fuel rates

HMRC advisory fuel rates can be used when reimbursing business fuel for a company car or when an employee repays private fuel. The rates change during the year, so use the rate applying on the journey date rather than copying an evergreen number. From 1 June 2026, HMRC also publishes separate advisory electricity rates for home and public charging of fully electric company cars.

Electricity is not road fuel for the company-car fuel-benefit rules, but VAT recovery still depends on who contracted for and paid for the electricity, business use and supporting evidence.

Fuel bought by an employee

A business can treat VAT paid by an employee as its input tax where it reimburses the employee’s actual qualifying fuel cost or pays a mileage allowance with a supported fuel element. The employer must hold evidence that the fuel was bought and used for business purposes. A receipt alone does not prove the business journey; a mileage claim alone may not prove VAT was charged.

Business journeys versus private travel

Ordinary travel between home and a permanent workplace is normally private commuting. Travel to a temporary workplace may qualify, subject to the employment travel rules. For sole traders and partners, journeys need a genuine business purpose and mixed-purpose travel may require restriction.

Partial exemption and non-business use

A business making exempt supplies or carrying on non-business activities may need a further restriction after calculating the business-fuel VAT. The fuel scale charge deals with private use of car fuel; it does not override partial-exemption or business-purpose restrictions.

Evidence checklist

• valid VAT fuel invoices or receipts showing the supplier and VAT details;
• date, start and destination, business purpose and miles for each journey;
• vehicle registration, fuel type and engine size where a rate depends on it;
• CO2 emissions and the applicable scale-charge table where used;
• employee mileage claims and proof of reimbursement;
• calculations separating business, private, exempt and non-business use.

Common VAT fuel mistakes

• reclaiming 100% while ignoring private mileage;
• claiming VAT on the full 55p mileage rate instead of its supported fuel element;
• using an out-of-date advisory fuel rate;
• keeping a fuel receipt but no business-mileage record;
• using scale charges for selected private-use cars while apportioning others;
• forgetting partial-exemption restrictions.

Official sources

• HMRC VAT Notice 700/64: motoring expenses
• HMRC fuel scale charge calculator
• HMRC advisory fuel rates
• 2026/27 mileage and fuel allowances

This is general information. VAT recovery depends on the facts, evidence and taxable activities.