Where you have company cars through your business you have the option of claiming back all the VAT paid on the fuel purchased for the cars. However, where the company cars are used for private mileage a fuel scale charge must be put through the VAT Return for each Return period. If the company can prove that no private mileage is travelled in the cars no fuel scale charge is necessary. In practice it is very rare that no private mileage is travelled in a company car so in the vast majority of cases a fuel scale charge is applicable if the VAT is reclaimed. Alternatively where your employees keep a mileage log of all mileage travelled it is possible to claim back the VAT on the business mileage only.
As any VAT reclaim on fuel is optional it is up to the company to determine whether or not it is beneficial to claim back the VAT given that a fuel scale charge will be applied. In cases where total mileage is relatively low it is often not beneficial to reclaim the VAT as the resulting fuel scale charge will result in a greater net cost to the company.
VAT fuel scale charges are based on the Co2 emissions figure of the vehicle in question. The Co2 is usually shown on the vehicle log book and this figure should be used to calculate the fuel scale charge. This change is an attempt by HMRC to align the fuel scale charge with the environmental efficiency of the vehicles engine such that cars with a higher Co2 figure (and therefore a less clean engine) will suffer a greater fuel scale charge than it’s greener counterparts. Where the vehicle’s log book is unavailable the Co2 emissions figure can be obtained from the online database compiled by The Society of Motor Manufacturers Limited available at http://www.smmtco2.co.uk/co2search3.asp.
Fuel scale charges are updated on a regular basis and the current fuel scale charges can be obtained from HMRC’s website at the following address https://www.gov.uk/government/publications/vat-road-fuel-scale-charges-table. The appropriate fuel scale charge is determined by both the Co2 emissions figure of the vehicle and the length of the VAT accounting period.