Fuel Scale Charges for VAT

I’ve updated this post on 7 October 2020 for changes in the latest legislation

The fuel scale charge is an adjustment made on VAT returns by businesses who pay for fuel which is used both privately and for business. Since you cannot claim back VAT for things used personally, HMRC created this scheme to easily adjust for personal use and simplify record-keeping for small businesses.

Using the fuel scale charge is one way a business can claim back VAT on fuel. You can find out more about the other options available in this guide.

What are Fuel Scale Charges?

The VAT fuel scale charge is applied when a VAT registered business provides fuel that is used both business and personally. The most common way fuel of this kind is provided is when a fuel card is used to fill up the tank every time it is empty. It would be hard to separate out how much fuel relates to personal travel, so to avoid this problem and make record keeping easier, the fuel scale charge can be applied.

A business can claim back all the VAT on fuel, just like any other eligible VAT expense, then make an adjustment on each return (at an amount set by HMRC) to reduce the input VAT claimed to reflect the personal use.

How is the Fuel Scale Charge Calculated?

The adjustment required on the VAT return to input VAT claimed on fuel, is set by HMRC according to the CO2 emissions of the vehicle. Here are the steps you need to take to calculate your adjustment:

1. Establish Vehicle CO2 Emissions

The easiest way to do that is to enter the vehicle registration number plate on the .GOV website. This will give you details of the vehicle, according to what is registered on their database.

2. Work out the Fuel Scale Charge

Once you have the CO2 emissions for the vehicle, head over to the HMRC website and use their fuel scale charge calculator. That will give your the gross, net and VAT amount you’ll need to put on your VAT return.

The rates change each year, so always keep an eye on the HMRC website.

Example

An employee is provided with a free fuel card for personal & private use with a Company Car which has CO2 emissions of this car is 130g/km.

The business reclaims all VAT on the fuel that the fuel card but due to the private use of the car and fuel they need to include a fuel scale charge on their quarterly VAT return. 

The HMRC calculator gives the following results:

HMRC Fuel Rate Charge Calculator

Recording the Charge on the VAT Return 

The fuel scale charge in the example above needs to be disclosed in Box 1 (the VAT element) and Box 6 (the VAT exclusive charge element) of the VAT return:

  • Box 1 would include £12.67
  • Box 2 would include £63.33

Depending on the accounting system you use, a journal entry for the fuel scale charge may be required.

Record Keeping

Unlike other ways of claiming for mileage and travel, detailed records are not necessary when claiming fuel and using the fuel scale charge. 

But you must keep VAT receipts for fuel, much like keeping VAT receipts for any other business expense.

Other Advice

The fuel scale charge is an easy area for the VAT-man to check and, with rates changing every year, inspectors know they may find errors in VAT returns they are inspecting.  So always make sure you check the rate you are using before submitting your VAT return.

You must also use the same policy across the board for all company cars in the business. You can’t choose to use the fuel scale charge for one vehicle and not reclaim VAT on fuel for another vehicle. If this happened, all cars would become ineligible for claiming any VAT back.


New Here? Learn how to set up the financial side of your business with these easy to understand guides and resources:

  • Sole Trader or Limited Company? – Download my free calculator to check which business structure would help you to pay less tax;
  • Tax Records and Bookkeeping – Understand what tax records you’ll need to keep and how to set up your own bookkeeping system;
  • Self Employment Taxes Explained – Learn what taxes you’ll pay, how much and when;
  • VAT Guides – From registration to de-registration, VAT schemes and thresholds, these guides will take you through the basics every UK small business owner needs to know;
  • Invoice Template – Free template and step-by-step guide so you can get paid by your clients.
Anita Forrest
About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - the UK small business finance blog for the self-employed community. Here she shares simple, straight-forward guides to make self-employment topics like taxes, bookkeeping and banking easy to understand.