Glossary · UK
What is VAT Fuel Scale Charge?
A flat-rate VAT charge businesses can use to account for VAT on fuel bought for a vehicle that is also used privately, instead of tracking every mile.
Full Definition
The VAT fuel scale charge is a simplified way for a VAT-registered business to account for output VAT on road fuel that it buys and reclaims input VAT on, but that is also used for private motoring, without having to keep detailed mileage records splitting business and private fuel use for every vehicle. Instead of tracking exact mileage, the business reclaims all the input VAT on fuel purchased for the vehicle, then pays a fixed quarterly (or monthly, or annual) VAT charge based on the vehicle's CO2 emissions band, using scale charge tables published and updated periodically by HMRC. Using the scale charge is optional -- a business can instead choose to reclaim no input VAT on fuel used for vehicles with private use, or to keep detailed mileage logs and reclaim input VAT only on the business-use proportion, and it may work out cheaper to do so for vehicles with very low private mileage or in very high CO2 bands, since the scale charge for those vehicles can exceed the VAT actually attributable to private fuel use. This is a separate tax mechanism from the income tax fuel benefit charge (which taxes an employee personally for private fuel provided in a company car) -- a business dealing with a company car with private fuel use may need to consider both the VAT fuel scale charge on the business's VAT return and, separately, the fuel benefit charge reported through payroll or a P11D for the employee.