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VAT - Petrol Mileage Records

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VAT Law is quite complex, even for smaller businesses.

One area which is frequently neglected is that of business cars and fuel.

Where a car is used partly within the business, and partly for other purposes, there are a number of options:

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  • claim all input tax on fuel purchases, and account for output tax using the petrol scale charges.
    This has the advantage that it is straightforward.
    It has the disadvantage that the output tax charge is quite generous towards the Exchequer for many users, and actually favours the taxpayer who makes mainly private journeys;

  • do not claim any input tax on fuel, and do not pay output tax using the scale charge.
    This is also an easy option.
    The effective cost of fuel is of course higher, as it includes VAT, but this can be offset against Income Tax (or Corporation Tax);

  • the third option is to only claim input tax according to the business mileage travelled.
    This requires that an adequate mileage record be maintained.
    For each trip, this should show the date, the reason for the journey (perhaps indicating the name of the person or business visited) and the mileage at start and finish. (Where a number of short, local, journeys are made on the same day, a detailed record of each may be onerous. As long as they are business journeys, it may be sufficient to include ‘local journeys’ in the record).

Whichever option is favoured, you should bear in mind the amount of paperwork required. Time is money, they say, so it may be more cost-effective to choose a simpler option, which keeps paperwork to a minimum.

November 2005




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