How Do I Reclaim VAT on Fuel for Business Trips?

Advice for Reclaiming VAT on Fuel and Petrol

While it might seem overwhelming and complicated at first, understanding the different ways to reclaim VAT on fuel and petrol expenses can put money back in the bank for your business. By claiming back VAT on fuel and petrol, your business can cut costs and save expenses, especially if these costs represent a hefty part of your operations.

Whether you run a fleet of company cars, frequently reimburse employees for mileage, or frequently travel for business purposes, you have several options for reclaiming VAT. But, familiarising yourself with regulations on VAT reclaim can be daunting, considering its implications on overall finance management and the potential risk of non-compliance.

Rest assured, we are here to help alleviate your concerns and guide you through this maze.

VAT, Mileage and Expense Compliance

If you’re looking for insights on VAT reclaim, mileage and expense compliance when it comes to employee expenses, look no further.

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In this blog, we've compiled a list of four ways businesses can reclaim VAT on fuel and petrol expenses for business trips so you can select the approach that works best for you or take a look at this quick explainer video.

Option 1 -  Could your business reclaim 100% of VAT?

The HMRC allows you to reclaim all the VAT incurred on fuel used exclusively for business purposes. However, this requires strict proof that no private journeys have been undertaken using said fuel. This might be a feasible choice for certain businesses such as taxi firms or driving schools, where all fuel usage links strictly to business operations.

Option 2 - Could a fuel scale charge be useful?

You can reclaim 100% of the VAT from business fuel if you also pay a VAT fuel scale charge. It’s a simplified way of taxing private use fuel. So, if a vehicle is used for business and private trips, you can claim VAT on business trips if you're also paying the appropriate fuel scale charge. The charge is based on the CO2 emissions and type of car driven. In some cases, if mileage claim rates are low, it may work out more expensive to claim the VAT back.

This VAT reclaim method is one of the easiest for HMRC auditors to check, and catch finance teams on, as companies forget to pay the fuel scale charge or update the amounts when the fuel scale charge changes every year.

Option 3 - What about claiming business mileage?

The third option is reclaiming the VAT on the business element of any fuel purchased by keeping a detailed mileage claim log. You then do the maths to work out how much of the VAT on that purchase can be reclaimed. Alternatively, you can use the advisory fuel rates published by HMRC.

Option 4 - Not reclaiming VAT

HMRC includes the option of not reclaiming VAT at all. However, if you decide on this method, it applies to all vehicles in your business. This means you cannot claim VAT for business journeys undertaken in commercial vehicles either.

Four-year rule for claiming business mileage

Apart from these options, it's worth remembering the four-year rule for reclaiming business mileage. If you have kept your fuel receipts or necessary evidence, you can claim missed VAT on fuel used for business journeys for up to four years. HMRC also maintains the right to ask for these receipts to validate your VAT reclaims.

While reclaiming VAT on fuel used in your business or by your employees can reap financial benefits, mistakes in calculating claims can lead to significant losses. Engaging professional help can ensure systematically executed beautiful calculations, timely compliance, and successful reclaim of costs where possible.

For more detailed insights on reclaiming VAT on business expenses, download the eBook ‘Expenses, VAT and HMRC Compliance in a Nutshell’. 

This guide will shed light on what information HMRC is particularly interested in and illustrate how the monetary value eligible for reclaim can be maximised. Look no further for the ultimate guide on VAT, mileage, and expense compliance. Your journey to effective VAT reclaim starts here.