Gabelle Tax Analysis: Businesses may be overpaying VAT on road fuel for private use

In Revenue & Customs Brief 11/12VAT: Road Fuel Scale Charges (RFSCS) – issued on 25 April - HMRC has confirmed that businesses may have been overpaying VAT on road fuel for private use when using the RFSCS. Reclaims of VAT are possible for the past 4 years and possibly ex gratia payments prior to that.

Businesses generally have to account for VAT on the private use of road fuel by accounting for a road fuel scale charge. HMRC has historically issued the charges applicable to vehicles on an annual basis.

Where a business had provided fuel to an employee for their private use and had made a charge for that fuel, the business had been required to account for VAT on the basis of the RFSCS, unless they had accounted for VAT on the basis of detailed records of private mileage or the charge made was at least for the cost of the fuel.

HMRC now recognises that accounting for VAT on RFSCS is not always correct. A business that has made a charge for the private use of the fuel should be given the option of accounting for VAT on the basis of the amount charged to the employee rather than the RFSCS. VAT on the overpayments will be repaid by HMRC.

Any businesses who consider that they have overpaid VAT as a result of this HMRC error should submit a claim for repayment of the difference between the amount already accounted for and the amount due on the basis of the charge to the employee.

Vaughn Chown is a Partner at Gabelle LLP. He can be contacted at vaughn.chown@gabelletax.com or via TaxDesk on 0845 4900 509.