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If the car is only used for business purposes, then all the input VAT can be claimed (subject to any restrictions for non-taxable supplies).

If you use a business car for personal use then you should be restricting the amount of input VAT you claim on the fuel you purchase to just the business element. There are several ways you could do that.

One of the simplest approaches is to use the fuel scale charge. In this scenario you would account for the VAT on your motor running expenses in your records as normal, and then apply the fuel scale charge on your VAT return. HMRC provide you with the fuel scale charge figures which are dependent on the CO2 emissions of the car. The fuel scale charge is effectively a claw-back and used to restrict your input VAT claim. The rates change on the 1st May every year and can be found here.

Accounting for the VAT on road fuel can be an administrative hassle and if the amount of business miles is low the fuel scale charge may be more than the input VAT claim and therefore it would not make sense to adopt the fuel scale charge method.

An alternative would be to keep detailed mileage records so you know exactly what the percentage is for business and personal use and then you can claim that percentage of input VAT. Detailed records would need to be kept.

If the fuel scale charge doesn’t work for you and you’re not keen on keeping detailed mileage records, the only other alternative would be not to recover any VAT on your fuel costs. You could still recover VAT on your vehicle repair costs.

HMRC provide guidance on input VAT and motor expenses in VAT Notice 700/64.

Claiming motoring expenses and VAT is a complex area. If you would like more information on claiming VAT on fuel or VAT in general please feel free to call us on 0800 0523 555 or use our simple online contact form.

Last updated: 29th September 2020

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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