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VAT road fuel charges: potential problems

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3rd Aug 2012
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The ICAEW Tax Faculty has voiced its concern over changing the UK law for VAT road fuel scale charges to comply with EU law.

In April HMRC published a technical note on VAT road fuel charges, which would remove the need for two concessions currently applied in this area.

The Revenue has proposed to enact the existing extra-statutory concession under which, where a business claims a partial recovery of the input tax on road fuel due to partial exemption, the road fuel scale charge can be apportioned to the same extent.

The tax faculty’s main concern is how partly exempt businesses may be affected by the proposed changes.

Businesses will be required to account for full road fuel scale charges, despite being only able to recover part of the input tax incurred on private fuel without keeping detailed records.

The key points in the ICAEW submission are:

“The proposals imply that partial exemption calculations will be required to be made on the basis of detailed records of business mileage. We therefore question whether the proposed withdrawal of the concession will be seen to be fair to all businesses, as partly exempt businesses would appear to face an additional administrative burden.”

“There will be a revenue impact on partly exempt taxpayers. It appears that there could be winners and losers. The extent of this appears to depend upon the level of private mileage, the road fuel scale charge applied to the car and actual costs of fuel. All of this will have to be considered by businesses before a decision is made on the best approach for them.”

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By Vinoo
06th Aug 2012 13:41

VAT Road fuel charges

The recovery of input tax on fuel will depend on the "Partial Exemption Method" used to apportion the input tax.Depending on the useage of the vehicles under "Direct Attribution" if 90% of the road fuel is used towards making taxable supplies then that is the percentage which may be claimable.

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