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Topical Tips
103
September
2007 |
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Businesses can reclaim the input VAT they incur on fuel costs, however if the
vehicle concerned has a private element of use, for example it is a company car
that is being used by an employee, then a certain fixed amount of VAT must be
declared as output VAT and paid over by the business. This element of VAT is
called the 'scale charge'.
To apply the scale charge first recover all the VAT charged on road fuel (there
is no need to split mileage between business and private use), then use the set
amounts prescribed by H M Revenue & Customs (HMRC) to declare as output VAT
an amount that represents the private usage.
Note that until 2007 the scale charge was based on engine size and the type of
fuel used, but with effect from Budget 2007 it is based on carbon dioxide
emissions, and for VAT periods starting on or after 1 May 2007 new scale
charges apply. For example, if a company's quarterly period ends 30 June 2007,
the new scale charge will first apply in period ending 30 September 2007.
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For vehicles registered after 2001, the CO2 emissions figure appears on the
Vehicle Registration Certificate (VC5). For vehicles registered between 1997
and 2001 the information can be obtained from The Society of Motor
Manufacturers and Traders Limited
website. In addition, the Vehicle
Certification Agency Car Fuel Data
website can be used to search for
specific cars. Further historical information is available at
The Vehicle Certification Agency. For
vehicles which do not have a CO2 emissions figure, the CO2 band is based on
engine size, as follows:
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If
its cylinder capacity is 1,400 cubic centimetres or less, use CO2 band 140 or
below |
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If
its cylinder capacity exceeds 1,400 cubic centimetres but does not exceed 2,000
cubic centimetres, use CO2 band 175 |
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If
its cylinder capacity exceeds 2,000 cubic centimetres, use CO2 band 240 or
above |
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Once the CO2 emissions have been established, the following table can be used
to identify the new scale charge rates for VAT accounting periods starting on
or after 1 May 2007: |
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- Ensure
the correct rates are used as these often catch businesses out when a VAT
inspection occurs. The relevant VAT and net scale charge should be declared on
the Output side of the VAT return
- Ensure
that for any vehicles believed to have no private use (e.g. a pool car) that
there is evidence to
support the fact
- If a car
is changed during a tax period and the new car is in a different category, then
the VAT should be accounted for by apportioning the scale charges for the two
categories. Alternatively, to keep it simple, the higher of the scales can be
used instead of apportioning
- If an
incorrect rate has inadvertently been used, then a correction should be made on
the next VAT return. However, if the cumulative error comes to more that
£2,000 of VAT then a special declaration to HMRC
must be
made
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Remember, if it is wished to claim the VAT on all business fuel paid for by an
employee and reclaimed from the company, then the company must have specific
evidence of the VAT incurred by the employee – see
Topical Tips 77
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Topical Tips is designed to be a simple and useful source of ideas and
information for clients and contacts of Barnes Roffe LLP. If you are unsure
about the implications of any idea contained therein please contact your Barnes
Roffe LLP partner. Barnes Roffe LLP cannot take responsibility if the
ideas are implemented without its involvement. |
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