VAT on Fuel

[iain3349]

If I use a van for business only, can I claim back VAT on the fuel? Do I need to be VAT registered? and does any one know how much VAT on fuel is these days.

Sorry for all the questions I am trying to work out my business plan and I have limited (that equates to zero) knowledge of VAT.

Thanks

Iain.

[Rob Holmes]

Sorry for all the questions I am trying to work out my business plan and I have limited (that equates to zero) knowledge of VAT.

Iain,

Ask as many questions as you like - thats why the forums are here!

I'm sure someone will be able to advise you :)

Rob

[Alpha]

If the van is business only then yes you can claim vat back on fuel.

In order to do this you would have to be vat registered.

Fuel has standard rate vat i.e. 17.5%

[iain3349]

Thanks for the help it is appreciated.

[Pilfo]

If the business pays for both business and private fuel, then there is a VAT Fuel Scale Charge that has to be paid with the VAT Return.

It may be worth calculating how much VAT on private petrol you wish to claim, and compare that to the VAT Fuel Scale Charge and see what benefits the business best.

If you are just to claim the VAT on the business use, you must keep a detailed record of the business mileage.

You will also have to contact HM Revenue & Customs so that your tax code is changed, as you will have to pay tax and Class 1A NICs if you use the van for private journeys.

You will have a 'Benefit in Kind' of £500 or £350 (depending on the age of the van) and therefore pay Class 1A NICs on the benefit. The amount will be adjusted through your tax code when you send in the P11d, and the Class 1A NIC gets paid with a company cheque.

Pilfo

[Joyous]

Hi Iain

You may well find that it’s not worth registering voluntarily for VAT just to reclaim the VAT on fuel. VAT works both ways so as well as reclaiming it on fuel and your other expenses you’ll also have to pay 7/47th of your income over to the VAT man. If, as one would hope, your income is more than your expenditure you will always have to pay over more than you are reclaiming which could impact severely on your cashflow. In order to avoid this hit you would have to add VAT onto all invoices you issue, effectively upping your prices by 17½%. In a competitive market you may find yourself losing business if you charge 17½% more than your rivals.

The benefits in kind and additional tax and NI that Pilfo mentions above only apply if you are running a limited company and the company provides you with the van for private use. None of this is relevant to you if, as you say, the van is purely for business purposes. In addition if you’re working as a sole trader rather than a limited company then it’s doubly irrelevant as you’re not an employee.

If you fancy a quick chat to go through this or other accounting issues you’re not sure of then feel free to contact me either by PM or via my site.

Regards

Joy