How Do I Reclaim VAT on Fuel? - Accountants in London

 How can I get my money back from the value-added tax? is a question that comes up rather frequently here. Additionally, VAT on mileage claims is one of the more complicated areas in which our customers frequently seek our assistance and advice. It can be difficult to determine how much VAT you are entitled to claim back, and it can also be challenging to acquire the proof you need to prove that you comply with HMRC rules.

Check out this short video for a concise explanation of how businesses can reclaim VAT on fuel and gasoline expenses incurred during business travel. In this post, we've compiled a list of the four ways businesses can reclaim VAT on these expenses, and you can choose the method that works best for you.

Option 1: Is it possible for your company to get back one hundred percent of the VAT it paid?

According to HMRC, you are eligible to reclaim the full amount of value added tax that you paid on fuel purchased for business reasons. However, you must be able to provide evidence that the fuel was utilised only for business purposes and that there were no personal trips performed with the vehicle during the time period in question. This is quite unlikely to occur unless your company operates as a taxi service or a driving school.

Option 2: Would it be beneficial to charge for using a fuel scale?

If you also pay a VAT fuel scale charge, you are eligible to reclaim the full amount of VAT that you paid on gasoline for your business. This approach of charging fuel for private usage is more streamlined. If a vehicle is used for both personal and business purposes, then you are eligible to claim a VAT refund on business-related travel expenses provided that you also pay the applicable fuel scale fee. The amount of the charge is determined by the CO2 emissions as well as the type of vehicle being driven. If the mileage claim rates are low, it may work out to be more expensive to claim the VAT back in some circumstances.

Companies frequently neglect to pay the gasoline scale charge or update the amounts if the charge increases from year to year, making this VAT recovery method one of the easiest for HMRC auditors to monitor and catch finance teams on.

Option 3: What about claiming your vehicle's mileage as a tax deduction?

The third alternative is to keep a complete mileage claim journal in order to recoup the VAT that was paid on the business portion of any fuel that was purchased. After that, you calculate how much of the value-added tax (VAT) that was paid on that purchase can be refunded to you. You also have the option of using the advice fuel rates that were released by HMRC on December 1st, 2017.

Option 4: It's possible that you won't bother to file a VAT claim.

This choice is presented as an alternative in the HMRC guide; however, if you make the decision to not claim any VAT, you must implement this policy for all of the vehicles used in your company, including commercial vehicles; consequently, you will not be able to claim VAT on the mileage travelled in the company delivery van.

Rule of four years for claiming mileage for commercial purposes

It is possible to make a claim for unclaimed VAT on fuel used for business travels for up to four years, provided that you have retained all of your fuel receipts and other essential documentation. In a similar vein, the HMRC may pursue you for the past four years' worth of receipts in order to demonstrate that you can back your VAT reclaims.

If your firm and its employees consume fuel, claiming the value-added tax (VAT) on that fuel could save your company money; yet, if you do it incorrectly, it could end up costing you money. It is in your best interest to make use of an outsourced and compliant service because, if done correctly, this can bring money back into your budget while also making the tax collector pleased.

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