Filling the tank
If a business claims input tax for the purchase of road fuel which is then used for private motoring in a car, there’s a flat-rate scale charge which depends on the emissions rating of the car. For example, if the car has a CO2 rating of 150g/km, the output tax this year is £55.50 each quarter.
If the employee pays the employer back for the use of private fuel, output tax is due instead on that payment. HMRC used to reckon they could charge the scale rate if it was higher than the actual consideration, but recently they realised that was contrary to EU law. So if an employee paid £1 a quarter for all private fuel, the output tax would be 16p, not £55.50.
They’ve worked out how to close this loophole, and new rules apply from 11 December 2012. Because this change requires an Act of Parliament, it won’t be properly in force until July, but anyone who is taking advantage at the moment will have to make an adjustment when the Finance Act is given its Royal Assent.
Even if you are not affected by the change, the VAT rules on cars and car fuel are complicated. If you aren’t sure how much input tax you can claim or output tax you should pay, we will be happy to advise you.