HMRC have published new VAT Scale Charges. 

These will apply to any VAT return period starting on or after 1 May 2025.

The Recovery of VAT on Fuel

Businesses are entitled to recover the VAT that they incur on the purchase of fuel for Motor Cars to the extent that the vehicle is used for taxable business purposes.

However, where a Motor Car is also used for personal purposes, then the business has to consider how this personal use can be accounted for.

The business could decide simply not to recover any VAT on the fuel purchase (and it may be that this is the appropriate course of action if the business in question does not use its cars much).

The alternative is that detailed logs of personal and business miles need to be kept. These then allow an apportionment of the VAT incurred on the fuel.

On the basis that the detailed logs can be onerous, most businesses decide to use the Scale Charges. This method sees businesses account for VAT on a set Scale Charge to reflect the Private Use. The Scale charge used depends on the CO₂ emissions of the car (and whether monthly, quarterly, or annual VAT Returns are submitted). If this method is chosen, then it will apply to all Motor Cars where a business funds the fuel purchases but there is private use of the vehicle. 

The fixed nature of the Scale Charge means that the more miles travelled the more beneficial the VAT recovery is.

If you need support or guidance regarding this issue, or the VAT recovery your business is entitled to more broadly, please contact our specialist VAT Team.