No VAT fuel scale charge for private use

Normally if you are reclaiming VAT on all your car fuel costs (whether the fuel was used for business or private purposes), HMRC expect you to pay VAT on the proportion of fuel that you don’t use for business.

HMRC’s argument is (and always has been) that fuel can be used for business and non-business purposes. The repayment of VAT on private fuel is made by applying a ‘fuel scale charge’ to your quarterly VAT return and paying this amount over to HMRC with any other VAT due.

However a case relating to VAT claimed on car fuel went before The First Tier Tribunal (‘FTT’) recently and, surprisingly, went in the taxpayer’s favour. This result was unusual because tax law in this area is fairly clear cut and there’s usually little room for argument if you’re taking the matter up with HMRC.

Broadsteady Ltd owned two cars which were used by its two sales reps, Beverley Cox and Fiona Jones, for work purposes and the company provided all fuel. Up until April 2012 the sales reps worked in the company’s offices and the cars were kept on the company’s premises. They used either car as and when it was needed. A couple of times a year, when they had a late appointment, the sales reps would take a car home for safety reasons.

However from April 2012 the situation changed and the sales reps started working from home and the cars were kept at their home. The sales reps also used the cars to travel to the company’s offices as well as customers. The company considered all the mileage to be for business purposes and therefore did not adjust their VAT returns to reflect any private use.

However HMRC considered the travel from home to the office as private use and so challenged this ‘non-adjustment’. Broadsteady Limited took the case to the Tribunal.

The Tribunal reviewed the legislation and decided that it was only if cars were allocated to an individual that the fuel scale charge would apply. Additionally it was also determined that a vehicle is not to be regarded as allocated if any private use is merely incidental.

There were a several factors that swayed the Tribunal’s decision in the company’s favour. However the main factor was that, up until April 2012, any private mileage was incidental and after that date, although the vehicles were allocated to the sales reps, as the reps were homeworkers any travel between home and the company’s offices was not private use.

Because there was deemed to be no private use, the Tribunal concluded that no fuel scale charge was due to HMRC.

In this case HMRC’s arguments on private usage failed. In particular, it was confirmed that home to office journeys do not constitute private mileage for homeworkers.

If you have any questions relating to this or any of the points raised simply email our friendly tax adviser, richard@thefriendlyaccountants, or give us a call on 01202 048696.


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