VAT Law is quite complex, even for
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
claim all input tax on fuel
purchases, and account for output tax using the petrol scale
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
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.